Why Walmart wants to hook up with TikTok
Linking up with the Chinese viral video app makes great business sense for the US retail giant
If there’s one thing TikTok users love, it’s Walmart. The American retail giant has ridden in to become the app’s unlikely saviour, and together with software giant Oracle, it is attempting to avert an impending ban of the app in the US.
A deal with TikTok’s Chinese owner Bytedance is currently being discussed, and would see the US firms take a stake in a new TikTok Global business. This would, in theory, ring fence the app’s international operations and data and allay fears over Beijing’s influence.
But that isn’t the reason Walmart has such a following on the viral video app, which has more than two billion downloads globally. In fact, searching Walmart-related hashtags turns up almost no commentary on the deal.
Instead, you’ll find a thriving community of Walmart bargain hunters and clearance sale detectives, racking up millions of views from young Americans seeking the cheapest possible way to stock up their lives and look sharp.
If their videos were paid for by Walmart, they carry no sign of it, and the chain’s official TikTok page is comparatively unpopular with just 1.9m total likes.
All of which suggests that there is serious demand for commercial activity on TikTok – and that Walmart’s involvement in a tie-up with its Chinese owners is not so strange as it seems.
“For Generation Z, what is a store?” asks Alex Zukin, an analyst at RBC Capital. “Is that just a warehouse where all the stuff I want is stored? Why do I have to go there? The digital world is the nexus of their relationships, whether it be on YouTube, TikTok, WeChat or WhatsApp... it’s not at a mall, it’s not in the physical world. So why would commerce be anchored to the physical realm?”
What Zukin is describing is a long-prophesied form of e-commerce that has never quite got off the ground in the West, but whose blowout success in China in recent years has many marketers salivating: “social commerce”.
Currently, social media users endure a hailstorm of adverts trying to coax them away to separate shopping websites. Many of those adverts are “retargeting” campaigns, aimed at bringing back users who started to buy a certain product but gave up or forgot halfway through.
Letting users buy products directly within their favoured apps closes that gap between intention and action, grabbing consumers right at the moment when their interest has been piqued (and perhaps before they have had time to really think the purchase through). Generation Z-friendly apps such as Instagram and Snapchat are clearly intrigued – and have already started to make forays into the space.
Instagram first launched features to allow users to “shop” posts back in 2017, with companies and influencers able to tag items in their pictures with prices and names so users could then search for them.
Last year, the Facebook-owned app went one step further and introduced an in-app checkout feature for brands such as Nike, Dior and H&M, to let people buy items directly over Instagram. Similar tentative steps have been taken at Snapchat, where followers of certain influencers and brands are able to swipe up on posts to buy items. Zukin says a tie-up between Walmart and TikTok could propel the grocery giant forward in its own ambitions: “The ability to have the least amount of friction between seeing something you want and buying it – if it can be directly integrated into TikTok, similarly to how it’s integrated into Instagram – that’s powerful. It’s something that I don’t believe Amazon currently has.”
Indeed, social media – and, perhaps, Generation Z itself – is a rare hole in Amazon’s empire. Its most viable platform for social commerce would be Twitch, the video-game-centric live streaming channel that it bought in 2014 for $970m (£760m). But even among “Zoomers”, not everyone is a gamer, so its reach may be limited.
That is where Walmart comes in. The company is a land-hogging behemoth, with more than 11,000 locations in 27 countries (including Britain’s Asda, which it is in the process of selling), more revenue than any oil company and a workforce that rivals the Chinese People’s Liberation
Army. Today, however, it is also locked in a race with rival Amazon online, and so far it’s losing. For one thing, Amazon’s online inventory is significantly larger, at an estimated 129 million products, whereas Walmart. com is reported to sell around 80 million items. The tech titan also has a wealth of “third-party sellers” who use the site to find buyers, and provide Amazon with a steady stream of income.
All this has meant that Amazon’s market share in e-commerce dwarfs its rivals. Last year, Amazon accounted for around 40pc of total e-commerce sales. Walmart had the second largest market share in the US ecommerce market, although only held a 5.3pc share, according to figures from eMarketer.
The grocery giant will be hoping that social commerce on TikTok offers it a rare opportunity to lead, not follow. In announcing its interest in TikTok, Walmart said the app’s integration of e-commerce and advertising “is a clear benefit to creators and users in those markets”.
A deal would “provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses”.
Walmart is likely to look to China for how such a partnership could work. There, Douyin, TikTok’s sister viral video app, has been testing ecommerce features since 2018, and Chinese favourites such as Xiaomi and Suning.com use the app to sell to customers.
The pay-off can be significant. Last month, during a two-hour live-stream of Xiaomi boss Lei Jun on Douyin, the company generated 210m RMB (£24.3m) of sales, attracting more than 50 million views – a record for the app.
“It is quite normal in China to have a live-stream where they sell millions of products in just a few minutes,” says Alessandro Bogliari, chief executive of the Influencer Marketing Factory. “People in the US and Europe are not so used to it. But this is the future, and where everyone is going. So I think it’s time to integrate social commerce.”
Still, even if Walmart does not use TikTok to propel its e-commerce efforts, the app may not actually need to do anything special to count as a win. Instead, it only needs to make the kind of healthy profit typical of big tech firms, supplementing the cellophane-thin margins of traditional retail (prior to Covid, Walmart’s margin was about 3pc).
Compare TikTok, says Zukin, to the role of Amazon’s cloud services division, AWS, whose soaring profits since 2015 have transformed its overall finances. “That’s the business where Amazon gets all their margin and weaponry to compete more aggressively with Walmart,” he says. Having a similar sideline would give Walmart more firepower to fight back.
Zukin derisively observes that this would still only make it “a poor man’s Amazon”. Then again, given that Amazon boss Jeff Bezos is currently as wealthy as about 506,000 median British households, perhaps being the poor man’s Amazon – perhaps literally – is not such a modest ambition.
‘It is normal in China to have a livestream where they sell millions of products in just a few minutes’