The current situation dominated by Dentsu and Hakuhodo is strange… The reality that the “world’s strongest supermarket” that earns over 500 billion yen from advertising is confronting Japan: Retail-originated media has become common sense around the world | PRESIDENT Online

The market for retail media, a new advertising service originating from retailers, is expanding rapidly. Professor Michiaki Tanaka of Rikkyo University Business School said, “Walmart’s US retail media business has reached over 500 billion yen. Furthermore, the new service “Walmart Luminate,” which began in 2021, will be combined with the company’s retail media to develop its business, and will greatly change the way marketing is done.”

Photo by ZUMA Press/Kyodo News Images

Shoppers at a Walmart in Vaughan, Ontario, during Quiet Hour, a time designated for those wanting to shop in peace, on Wednesday, July 2, 2024.

New service from the world’s largest retailer, Walmart

In May, Walmart announced that it would expand its data analysis service, “Walmart Luminate” (hereinafter “Lumine”), to Mexico and Canada. As the world’s largest retailer, the company operates more than 4,600 stores in the United States and more than 10,500 stores in 19 countries around the world. It is safe to assume that the service will eventually be expanded to countries other than the United States, Mexico, and Canada.

Luminate is a service launched in 2021 for suppliers (companies that wholesale goods to Walmart) that provides data analysis of product sales and shopper purchasing behavior at the company’s physical stores and e-commerce site.

As for Walmart, in March of this year,Why is Walmart able to earn over 500 billion yen from “advertising”? The essence of “retail media” that Japanese retailers misunderstand“Retail media” is a system in which retail companies use customer data and other information to deliver advertisements to their own smartphone apps and in-store digital signage. A report by GroupM, a subsidiary of the British advertising company WPP, predicts that retail media will surpass the television advertising market in 2028.

Earning over 500 billion yen from “advertising”

In the United States, most major retailers are involved in retail media businesses. Among them, Amazon and Walmart are by far the biggest in terms of sales. Walmart in particular has grown rapidly over the past three years, and currently has sales of approximately 510 billion yen. In terms of the Japanese advertising industry, this puts it in the top three after Dentsu and Hakuhodo.

Luminate is a marketing service provided by Walmart, and is expected to be particularly useful in combination with the company’s retail media. With highly accurate data analysis, the service has a proven track record in supplier inventory management, sales forecasts, promotion effectiveness measurement, and new product development. Furthermore, sales forecasts and promotion effectiveness that can be determined from such data analysis can be applied to other retailers, leading to a fundamental rethinking of traditional marketing.

In the February-April quarter of 2022, five months after Luminate’s launch, the number of companies using the service increased by 50% compared to the previous quarter, and sales increased by 75%.

In the United States, 90% of the major suppliers and 50% of the small and medium-sized suppliers that supply goods to Walmart have contracts with Luminate. Suppliers that do not use the service are at risk of losing their shelf space to competitors.

If a similar service were to become reality in Japan, it would have such an impact that it could replace part of the work of advertising agencies such as Dentsu and Hakuhodo.