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April 14, 2025
Is Walmart’s 25% Ad Spend Growth Push Fair to Its Retail Media Network Clients?
In an April 11 Forbes report outlining Walmart’s aggressive push to see its retail media network clients increase their ad spend by 25% year-over-year in the days to come, a debate concerning the value (and ethics) attached to the business emerged.
As part of retailers’ joint business plans (JBPs) made with Walmart Connect — the blue-and-yellow brand’s retail media network platform — Adweek outlined that these clients are being asked to meet significant, and significantly increased, ad spend commitments. Those who fail to meet these targets could see the loss of “key benefits in their supplier relationship with Walmart,” Forbes contributor Kiri Masters wrote.
“The situation at Walmart highlights a concerning — though not altogether new — pattern in retail media that threatens to undermine trust in what has become many retailers’ most profitable business segment. Some brands are now taking drastic measures, including breaking annual agreements with Walmart and other retail media networks, as pressure mounts to increase ad spending without corresponding performance improvements and amid other macroeconomic pressures,” Masters added.
Walmart Derives a Large Portion of Operating Income From Growing Connect Business
For its part, Walmart execs have recently been extolling the virtues of the company’s growing ad business.
John David Rainey, Walmart’s CFO, recently detailed that “a little more than a quarter of the overall operating income” for the retail giant’s Q4 2024 performance was derived from advertising and membership revenue.
Further, Seth Dallaire — charged with helming Walmart’s growth organization — signaled that the company saw “over 26% growth” in its Connect business during an April 9 Q&A session call held during its Investment Community Week event, as Seeking Alpha reported.
Walmart’s Quest for Increased Profits Could Clash With RMN Clients’ ROI on Ad Spend
The stage is set, as Masters underscored: Walmart’s investors are keen to see high-margin, high-growth segments of its business — notably, its RMN business via Connect — continue to deliver on its current trajectory. That may be directly at odds with the desires of its RMN clients, who ultimately must question the value of their ad spend and the pressure being applied on them to continually up the buy.
“One CPG brand executive told Adweek that despite tripling their spend on Walmart over the past three years, they’ve seen only moderate sales growth — in some years even experiencing a decline in market share. Another reported little to no growth in top-line sales or overall volume despite increasing investments,” Masters wrote.
Those who elect not to fall in line with Walmart’s 25% increased ad spend request this year could face significant penalties, including the loss of “Walmart DSP data fee discounts, onsite sponsorship deals, and early access to reporting,” per Adweek.
This pay-to-play gambit may have cost Walmart at least a few clients. One CPG brand was quoted by Adweek as canceling its ad relationship with Walmart due to “a lack of flexibility in the deals, no growth in sales, as well as no performance guarantees,” also nixing similar deals with Amazon and Kroger.
Ross Walker, director of retail media at Acadia, indicated that there was at least some degree of broad-based discontent brewing in response to Walmart’s ask.
“A lot of our largest [clients] got big pitches,” Walker said.
“Some of them are pulling out of their JBPs altogether and being more self-serve with Walmart ads. Lots of brands pushing back on Walmart, rejecting these pitches, in favor of more flexibility,” he added.
Discussion Questions
Is Walmart’s request of a 25% hike fair to its RMN clients? Why or why not?
Will Walmart’s aggressive pursuit of increased RMN ad spend pay off, or will it see a slowing of growth as clients seek alternatives?
Are the benefits offered by Walmart simply too good for clients to pass up?
Poll
Loading …BrainTrust
John Hennessy
Retail and Brand Technology Tailor
Ian Scott
Director, Ian Scott Retail Consulting Ltd
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
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It is obvious why Walmart wants retail media growth: it’s high margin and it’s an important driver of growth that augments the core business. Trying to persuade brands to spend more is fine if it’s done off the merits of the investment. Strong-arming them into spending more when the return is not there is less tasteful, though it’s not really anything new: Walmart and all of the grocers are very tough negotiators and have always charged brands various fees for marketing and other activities.
It’s inherently silly to describe business relationships in terms of “fairness”, particularly with regard to WalMart (or Apple or google or….any other behemoth); the only relevant questions are (1) is the demand actually (likely) illegal? and (2) is the partner better off without it?. As #1 is seldom an issue – and no claim for it seems to be made here – let’s talk about #2: more data please.
The goal of Walmart’s ad spend growth push is likely to increase its market share and solidify its position in retail media.
As an alternative to a 25% hike, Walmart could consider implementing a more gradual increase over time to ease the burden on its RMN clients.
Alternatively, they could offer tiered pricing structures based on the level of service or benefit provided to clients. It is possible for Walmart to maintain strong relationships with its clients while adapting to changing market conditions by exploring these options.
In the short term, Walmart’s aggressive strategy may boost its market position through increased ad spending. Clients may, however, turn to competitors if they perceive Walmart’s price hikes as unreasonable, potentially weakening its long-term market dominance. Maintaining client loyalty and sustaining Walmart’s growth will require balancing these factors.
There is a possibility that Walmart’s competitors might take advantage of Walmart’s discontented clients, offering more competitive pricing and enhanced services.
Additionally, they could emphasize their commitment to stable pricing and client satisfaction. The competitive pressure could force Walmart to reconsider its pricing strategy and mitigate the risk of losing market share.
This strong arm tactic is a worrying development and underlines how grocers are excited about this incremental revenue stream, despite it’s questionable benefit to brands and shoppers.
Pressure from investors to grow the retail media revenue should not be the reason to coerce brands into wasting money on a channel that does not appear to deliver the returns that warrant the investment.
Most grocery retail media is ineffective because it needs proximity to the product to impact shopper behaviour. Most screens are too far from promoted products, and the moment is lost because people need to shop other categories as well.
I wonder how long it will be before brands challenge this strategy and refuse to pay for content that doesn’t deliver? This is the fear I have had about RMNs and we will now see if the whole system can sustain forced payments for content that doesn’t work.
Within this article is a strong indication that Walmart’s retail media network ads aren’t working for brands. One brand cites seeing declines in sales in spite of increased spending.
If the ads were helping to increase sales, increased ad spending would be organic. Brands would spend more to achieve more success.
The article also links the penalty from Walmart for not increasing ad spending to loss of Walmart perks not lost sales. That does not make a strong case for increased sales from increased ad spend.
A big, powerful retailer is muscling its suppliers for $$$ that might not provide a solid ROI for the supplier…??? Gosh, where have I heard that one before? I expected better of Walmart in this day and age.
“I have changed the terms of the deal. Pray I do not change them further.” Hmm, a lot of that behavior going around. Time is growing ripe for rebellion, it would seem.
Walmart can ask for whatever they like – and even make aggressive demands like a 25% hike – but that doesn’t mean brands will blindly spend without seeing a reasonable return on their investment. Plenty of brands will pay-to-play with Walmart, even if the ROI is questionable because their long-term relationship and sales volume warrant it. However, as RMNs gain traction, brands are being pressed by an ever-increasing number of retailers attracted to the potentially significant margin enhancement that RMN offers. And while Walmart has the channel power to force brands to pay-up, and many will, eventually brands will stop investing if they don’t see a return. I doubt that Walmart would make media investments if they didn’t see a return.
This is the Wal Mart way-become so big you have negotiating leverage, then use that advantage to your (and WM shareholders) advantage. Whether it is “fair” or not is not the right question-the question to ask is what is the reach one gets for placing ads in WM stores, and does that reach equal value vis a vis other channels or mediums?
I assume the answer to that is yes, otherwise WM would not push for this increase so publicly.