Walmart’s full-year results give a new glimpse into the growth of its Amazon-like flywheel

“We’re making good progress on expanding the number of U.S. marketplace sellers that also utilize Walmart Connect advertising,” Walmart CFO John David Rainey said during the company’s fourth-quarter earnings call. The company’s overall U.S. advertising sales increased 24% year over year, and U.S. marketplace revenue grew 37%.

The new figure is reflective of a growing number of third-party Walmart sellers — 150,000 as of last year, according to Marketplace Pulse. Like on Amazon, they have found a need to invest in ad placements on Walmart’s website to promote their marketplace products. On a larger scale, this demonstrates how the retailer’s different rapid digital investments work together to fuel overall growth.

The company posted a 20% year-over-year increase in its U.S. e-commerce sales for the fourth quarter. That far outpaced the retailer’s overall U.S. comp sales growth of 4.6%. Advertising and memberships made up a little more than a quarter of the company’s overall operating income in the fourth quarter, Rainey said. For the full year, Walmart’s global advertising business grew 27% to $4.4 billion.

“We’re seeing an increased interest [in Walmart], for sure, across all categories,” said Will Haire, co-founder and CEO of BellaVix, a marketing agency for sellers on Amazon and Walmart’s marketplaces.

Haire said he has talked to some brands who previously didn’t think their customers would be shopping at Walmart who have now realized a need to have at least somewhat of a presence there. Those include brands that sell high-end baby or beauty products. This comes as Walmart executives have shared over the past few years that the big-box giant has gained market share with higher-income shoppers, particularly those making more than $100,000.

“We’ll see how it actually shakes out,” Haire said. “The Walmart shopper still appears to be more conservative and more working-class, whereas the Amazon shopper tends to have more discretionary income so they’re more likely to pay extra and expect to see more premium brands.”

More third-party sellers on Walmart’s website increases the need for each individual seller to pay for visibility and exposure, said retail media analyst Andrew Lipsman of Media, Ads + Commerce. “As more brands have to compete for any individual search term, that also pushes monetization up over time,” Lipsman said. “That’s a way of winning mind share if your brand, especially, is not a household name.”

Walmart has been expanding in the advertising space since rebranding its retail media network to Walmart Connect in 2021. Amazon built its business on the idea of a flywheel: It has multiple components that bring customers and brands in, and as it grows, it reinvests to grow the business and bring costs down. Walmart, by contrast, has traditionally grown by selling products in its stores, though it has been growing its e-commerce business and more heavily investing in services. In December, Walmart completed its roughly $2.3 billion purchase of TV maker Vizio, providing another large channel through which to deliver ads to customers.

“I think all brands will need to have some type of presence on both [marketplaces],” Haire said, adding, “I do think the pendulum is starting to swing, and maybe people are just getting fed up with Amazon,” pointing to increases in fees that have driven some sellers to look elsewhere.