Walmart, TikTok and the Future of Customer Intimacy

When the news broke on Microsoft’s bid for the U.S. arm of TikTok, the only surprise was the unconventional way in which the target was forced onto the auction block. Adding a short-form video social media site, hugely popular with younger generations, is a natural extension of Microsoft’s collection of digital businesses and recalls Google’s YouTube acquisition in 2006. Walmart throwing its hat in the ring was more of a surprise to some, but it shouldn’t have been.

Consider the Amazon.com origin story. Jeff Bezos started the company as an online bookstore, but its longer-term ambition was to learn about current and future customers through their data and to sell them whatever they needed. When asked about customer loyalty in a 1997 Wired Magazine interview, Bezos replied: “We have to totally obsess over our customers and figure out what they want, what’s important to them. And whatever it is that’s important to them, we’ve got to figure out how to provide it.” Billions of web click-streams, Echo voice requests, supermarket orders and Ring home security video analyses later, let’s just say they know a thing or two about us.

Which brings us back to Walmart. It was a brick-and-mortar Goliath to Amazon’s e-David in those early days. Up until the mid-2010s, it was seeing customers steadily picked off by Amazon’s digital-customer-obsession machine. It has since gone on an e-commerce buying spree, snapping up online retailers and technologies, and driving synergies between its physical distribution and the flagship Walmart.com site.  With 2020 being the year of touchless buying, its investments are paying off, with online sales nearly doubling in the latest quarter. Good for the business, but more importantly, good for understanding its customers on a deeper level.

Customer Intimacy Begins with Customer Data

So, why would the world’s largest physical retailer want to buy a social app best known for viral dance trends, challenges and lip-sync videos? Several reasons, actually.

• Mobile commerce is the future. TikTok’s Chinese equivalent Douyin is moving into mobile commerce, selling products on its app, driven by a market of influencers and video phenoms. Business Insider forecasts that mobile commerce (aka, “m-commerce”) will reach $284 billion, or 45% of the total U.S. e-commerce market, by the end of 2020. This is up from a 12% share five years ago.

• Demographic diversification. The average demographic profile of today’s Walmart shopper in the U.S. is a 46-year-old white woman. By contrast, 41% of global TikTok users are between 16 and 24 years old. This younger, Gen Z cohort is more racially and culturally diverse than previous generations. In the U.S., there is widespread (62%) use of the TikTok app by teenagers, nearly twice the number using Facebook.

• Converting consumer data into insights. All of the time that potential consumers spend on TikTok is captured in “digital breadcrumbs” that can be combined with other data to craft a profile at an individual and demographic level. If this sounds fantastical, consider that there is a multi-billion dollar industry that makes its sole living from your data. This level of insight would allow Walmart to improve targeted marketing and recommendations for additional products and services.

The Future of Customer Intimacy

There is a popular catchphrase at Gartner that every company is a tech company. In today’s competitive world, companies need to be digitally connected to their customers to understand and respond to changing interests, preferences and needs.

TikTok is now a pawn in a much larger geopolitical chess game and, as of the time of this blog post, it is unclear whether the Chinese government will even allow the sale of its U.S. business to go through.  Either way, Walmart’s bid was a savvy move. It’s not the first and certainly won’t be the last “digital customer intimacy” play we’ll see over the next few years.

Stan Aronow,
VP Distinguished Advisor,
Gartner Supply Chain
Stan.aronow@gartner.com