Why Walmart & Tik Tok could be the deal of the decade

Some business may not be flashy nor have new and upcoming technologies, which is true for Walmart. However, they have been steadily digitizing through acquisitions as well as investments into spreading their presence globally and expanding the product lineup.

They made over 288$ Billion in revenue in 2019 from groceries, accounting for 53% of sales, marking them as the largest grocery retailer.

Walmart’s shift to selling groceries back in 1988 created a moat of dominance. However, this moat must be maintained, especially during the age of digitization & covid where change is accelerated. When Amazon bought Whole Foods, it had a thesis on how this would play into the business, which was leveraging its fast delivery infrastructure with grocery. However, Whole Foods specializes in Organic foods and is seen as a higher end grocery store, meaning the wider public will not be purchasing from here.

This is where Walmart steps in. Leverage the existing customer to expand sales and retain the moat.

According to a 2015 survey, the average customer at Walmart has an annual household income of $53,125.

Interestingly, Tik Tok also has a similar audience, with 75% of users in the age range of 18–34, representing a younger generation.

According to studies, 30% of US TikTok users report household income of $40,000 or less and 37% of users report household incomes of $100,000 or greater with the remaining 33% users falling in between.

With the massive user base of Tik Tok, should Walmart be able to advertise their services, such as their upcoming Walmart Plus service, featuring same day delivery of groceries, this will strengthen sales and only fortify their position in the grocery business. Furthermore, a trend that has risen from Tik Tok in China, known as Douyin is the idea of social commerce in which users recommend certain products, such as groceries and due to the Tik Tok algorithm, anyone is able to become viral, providing anyone with a great message a massive advertising potential.

In China, social commerce has bolstered the income of many local farmers due to great produce and a genuinely warm personality. If Walmart is able to acquire Tik Tok and cultivate this trend, the $680 Billion Business could be theirs as well as snatching customers from Amazon’s Prime customer base. Imagine Walmart supporting Tik Tok users to promote certain products, such as Walmart Plus or even advertising certain items. This genuine recommendation system could become the future of advertisement and bolster sales.

Walmart has the infrastructure of warehouse storage (their stores) across the U.S already, which is a huge advantage over Amazon. If they are able to leverage this existing supply chain infrastructure along with acquiring advertising rights on Tik Tok, Walmart’s Market cap and subsequently stock, could see a big upside. Thus, this deal is one to keep a close eye on!