Why Walmart’s Knocking On TikToK’s Door

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Big box behemoth. Tech juggernaut. Controversial social media upstart.

Talk about strange bedfellows.

TikTok’s Chinese owners are reportedly looking to sell its U.S. assets. That search was spurred by President Donald Trump’s executive order this month that ByteDance sell the U.S. TikTok assets to a U.S. firm.

Walmart and Microsoft are, perhaps, interested in teaming up to buy the video sharing application. By partnering with Microsoft, Walmart gets the tech clout it might need in terms of cloud storage/data security and privacy. (These are issues that have been cited in the political arena surrounding TikTok here in the states.) Microsoft, as CNN reported, has said all Americans’ TikTok data will be transferred to the U.S.

As far as the linkup between Walmart and Microsoft, the two companies announced a strategic partnership two years ago that brought Azure and Microsoft 365 to Walmart. The big box retailer has not been shy about leveraging artificial intelligence (AI) and machine learning (ML) to improve operations.

For Walmart, at least, the old strategy of buy versus build may stand firmly with the former — it’d be a running start. Amazon may be squarely in the crosshairs, but a TikTok acquisition can expand the breadth of Walmart’s consumer base.

“We believe a potential relationship with TikTok U.S. in partnership with Microsoft could … 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,” said Walmart in a statement. “We are confident that a Walmart and Microsoft partnership would meet both the expectations of U.S. TikTok users while satisfying the concerns of U.S. government regulators.”

Eyeing Omnichannel Expansion

Walmart, of course, has been making significant roads into omnichannel efforts, particularly digital ones.

As evidenced in its second quarter earnings, Walmart’s results showed a U.S. comp-store sales increase of 9.3 percent over Q2 2019. But the real standout was eCommerce, which saw a 97 percent surge, accelerating from 74 percent in the first quarter.

The eCommerce growth shows the great shift to digital is underway, and Walmart sees value in inducing shoppers to click and pick up (or have goods shipped). But it takes money to fund eCommerce, and Walmart Media Group sits squarely at the intersection of media and commerce. The unit said last month that it had launched Performance Dashboards, billed as an omnichannel reporting solution that can help brands see how they are doing online and in store.

Social-media-as-conduit to shopping is gaining traction. TikTok has roughly 100 million users in the U.S., and those users skew younger and are tech savvy. That’s up from about 11 million users two years ago.

By buying into that large installed base of users, Walmart conceivably gains some critical mass in its eCommerce competition versus Amazon, where Amazon has made inroads with younger consumers.

According to recent PYMNTS survey data, 72 percent of Walmart shoppers are members of Generation X, baby boomers or seniors, which implies that the remaining 28 percent are tied to the coveted millennial, bridge millennial and Generation Z demographics. By way of comparison, 41 percent of Amazon shoppers come from those younger cohorts. In terms of income, 44 percent of Amazon shoppers have an income above $100,000 annually; about 27 percent of Walmart shoppers have that level of income, PYMNTS found. Amazon’s data show the allure of spending power concentrated in the hands of younger shoppers — and to get to those younger shoppers, digital is the way to go. And TikTok may offer a shorter path to getting there.

The “Shop Now” button on TikTok is but one offering across a burgeoning movement to link commerce and content. As reported this week in PYMNTS, Facebook Shop helps customers shop for their favored brands and make purchases; Instagram Shop debuted earlier this summer for in-app purchases.

Turning back to TikTok, a glance at Walmart’s TikTok account shows that the retailer has about 297,000 followers. The cross-pollination that embraces advertising, analytics, media and virtual sales offerings would bring Walmart all the more firmly into the age of digital commerce.

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