What Rich Lehrfeld’s media buying background means for Walmart RMN business

Summary

The Digiday Podcast: What Rich Lehrfeld’s Media Buying Background Means for Walmart RMN Business

Release Date: October 29, 2024

Host: Kameka McCoy, Co-Host and Senior Marketing Reporter at Digiday

Guest: Rich Laerfeld, SVP and General Manager of Walmart Connect

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1. Introduction and Episode Overview

In this episode of The Digiday Podcast, host Kameka McCoy delves into the booming world of retail media networks (RMNs) with a special focus on Walmart Connect. The episode explores how Rich Laerfeld’s extensive media buying background has shaped Walmart’s approach to the retail media landscape, positioning it as a top contender amidst a crowded market. Before engaging with Laerfeld, Kameka and co-host Michael Berkey, Senior Editor of Media Buying and Planning at Digiday, discuss the latest industry developments, including agency earnings, the rise of AI in marketing, and the emergence of new ad exchanges.

2. Agency Earnings and the Rise of AI in Marketing

Kameka McCoy and Michael Berkey kick off the discussion by reflecting on the recent ANA Masters of Marketing conference, highlighting key trends and takeaways.

• Conference Insights:

  • Berkey emphasizes the "great networking and even learning a couple of things from what's being presented on stage" [01:10].
  • Key themes included the ongoing debate between brand versus performance marketing, and the innovative use of data to drive marketing strategies. For instance, a presentation from AT&T explored thick data, which combines qualitative insights with quantitative metrics to better understand consumer emotions and behaviors [02:03].

• Artificial Intelligence (AI) in Marketing:

  • AI remains a hot topic, with Berkey noting its pervasive presence: "I don't think there was a single session where AI didn't come up" [03:01].
  • AI is being leveraged to manage vast amounts of data, enhance creative processes, and optimize media decisions. However, Berkey suggests that while AI is promising, its impact on the bottom line is still more theoretical than tangible: "In terms of actually materially affecting the bottom line, I just don't see that yet" [04:16].

3. CMOs Under Pressure: Case Studies of Red Lobster, Starbucks, and Gap

The conversation transitions to the challenges faced by Chief Marketing Officers (CMOs), particularly in legacy brands striving for renaissance.

• Red Lobster:

  • Facing operational challenges, Red Lobster has recently appointed a new CMO with a strong background in rebranding efforts from Smokey Bones. The hope is to replicate past successes and invigorate the brand [07:05].
  • Berkey points out the immense pressure on CMOs to juggle marketing, sales, data technology, and infrastructure, often leading to shorter tenures: "They're just expected to be magicians to solve all these problems, and not all of them can always do it" [08:03].

• Starbucks and Gap:

  • Starbucks has brought in leadership from Chipotle, a brand that successfully navigated significant PR challenges, including E. coli outbreaks and social media backlash over portion sizes. Berkey expresses optimism about Starbucks’ potential for turnaround based on Chipotle’s resilience: "That CMO did a pretty admirable job of staying the course, keeping the message relatively simple, focusing back on healthy, fresh ingredients" [09:38].
  • Gap, on the other hand, has seen positive results, but the future remains uncertain for other legacy brands.

4. The Proliferation of Ad Networks: Spotify’s New Ad Exchange

The podcast shifts focus to the expanding universe of ad networks, with Spotify launching its own ad exchange aimed at small and medium-sized businesses (SMBs).

• Spotify’s Move:

  • Kameka highlights Spotify’s initiative to create an ad exchange or supply-side platform (SSP) to scale its automated ad business, mirroring strategies employed by giants like Meta: "So we are once again on the cusp of everything is an ad all the time" [10:54].
  • Michael Berkey remarks on the saturation of the ad network market, forecasting a potential shakeout due to the sheer number of players: "I don't think the marketplace can ultimately sustain all that and we'll see some shakeout" [11:54].

• Implications:

  • The move underscores a broader industry trend where every company seeks to monetize its data, leading to the creation of numerous ad networks and retail media networks. Spotify's venture into this space is seen as an attempt to diversify revenue streams beyond subscriptions.

5. Interview with Rich Laerfeld: Walmart Connect and Retail Media Networks

The heart of the episode features an in-depth interview with Rich Laerfeld, whose transition from media buying to leading Walmart Connect provides valuable insights into the RMN boom.

a. Background of Rich Laerfeld

Rich shares his journey from being a seasoned media buyer with over 25 years of experience to stepping into a sales-focused role at Walmart Connect. His extensive background equips him with a unique perspective on building and scaling RMNs.

b. The Retail Media Boom: Causes and Impact

• Defining the Boom:

  • Rich attributes the surge in RMNs to several factors, including the prioritization of first-party data following Google’s fluctuating stance on third-party cookies: "The notion of understanding your customer and delivering that value is going to be critical" [17:40].
  • The integration of data and technology to drive sales at the point of purchase has made RMNs a valuable asset for retailers looking to diversify revenue streams [15:18].

• Historical Context:

  • Retail media isn’t entirely new; it has evolved from traditional in-store displays and site media to sophisticated, data-driven platforms that engage consumers both online and offline [30:58].
  • Rich explains the transformation: "Retail media infused… using data and insights in a safe way to use audiences to buy, operationalize, and ultimately measure" [30:58].

c. Walmart Connect's Evolution and Strategy

• Insourcing and Platform Development:

  • Walmart Connect began by insourcing its media business five years ago, focusing on creating a customer-centric platform that leverages Walmart’s vast first-party data to deliver targeted and measurable advertising solutions [15:18].
  • The strategy revolves around automation, self-service, and transparency, aiming to cater to both large and small suppliers with scalable solutions [21:08].

• Team Building:

  • Rich discusses the importance of assembling a diverse team with expertise in various facets of media, including agency relationships, programmatic advertising, and data analytics: "Bringing different types of people from different types of companies… they have different perspectives" [28:32].
  • Emphasis is placed on fostering a culture that aligns with Walmart’s core values while integrating new media technologies [28:44].

• Strategic Partnerships and Technology:

  • Walmart Connect has engaged in strategic partnerships, such as the pending acquisition of Vizio, to enhance its full-funnel marketing capabilities, combining upper and lower funnel strategies to deliver comprehensive value to clients [21:15].

d. Future of Retail Media Networks

• Industry Consolidation and Aggregation:

  • Rich forecasts continued consolidation among large retailers, who will likely keep their RMNs in-house to leverage extensive first-party data: "The large ones like Walmart Connect continue to insource" [33:57].
  • Mid-tier and smaller retailers may turn to third-party aggregators to manage the complexity and scale of advertising operations [35:37].

• Innovation and Expansion:

  • Walmart Connect plans to expand its offerings through connected TV (CTV), influencer collaborations, and enhanced automation tools: "We're seeing much more lifts in their performance" [35:44].
  • Emphasis on proving incrementality and delivering measurable impact remains a cornerstone of Walmart Connect’s strategy [35:44].

• Vision for the Future:

  • Rich emphasizes creating new avenues for brands to connect with customers, increasing accessibility for all sizes of brands, and continuously improving performance metrics: "Those three things, new ways to connect, access for brands of all sizes, and performance and value creation" [35:44].

6. Conclusion

The episode wraps up with Kameka McCoy expressing appreciation for Rich Laerfeld’s insights, highlighting the transformative potential of retail media networks and Walmart Connect’s strategic positioning within the industry. Listeners are encouraged to share the episode and engage with Digiday’s ongoing coverage of digital marketing trends.

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Notable Quotes:

• Michael Berkey [02:55]: "AI is just the shiny new object everywhere."
• Rich Laerfeld [15:18]: "Retail media infused, using data and insights in a safe way to use audiences to buy, operationalize, and ultimately measure."
• Rich Laerfeld [35:44]: "We're seeing much more lifts in their performance."
• Michael Berkey [06:26]: "The haves continue to have and the have nots are doing their best to have a little bit at the top of the spectrum."

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This comprehensive summary encapsulates the key discussions and insights from The Digiday Podcast episode, providing valuable information for marketers, advertisers, and industry enthusiasts interested in the evolving landscape of retail media networks and Walmart Connect’s pivotal role within it.

Transcript

[Rich Laerfeld]

Foreign.

[Kameka McCoy]

Welcome to another episode of the Digiday podcast. I am Kameka McCoy, co host and senior marketing reporter here at Digiday. Later on in today's episode, I talked to Rich Laerfeld, SVP and general manager of Walmart Connect about the retail media boom and the role that Walmart Connect plays in said boom. A lot of that conversation is about how Larefield came into the role as a media buyer and how that helped shape Walmart's offering to make it a top contender. And obviously doesn't hurt that Walmart's got a massive footprint. But before that, we're going to talk about some of this week's so called juicy scoops, from agency earnings to new ad exchange. And for that I am joined by Digiday's senior editor of media buying and planning, Michael Berkey. Berkey, welcome to the show.

[Michael Berkey]

Thanks Kimiko. It's great to be here.

[Kameka McCoy]

I think the most important thing right now is that we are wrapping up another conference. It's a blitz in Q4 of how those go by, which was the the ANAs. You did some reporting down there. Talk about what, what you saw, what you heard.

[Michael Berkey]

Well, I had to do all my reporting from far away. But the Ana Masters of marketing is kind of the greatest confab of CMOs that you'll find any given year. And to your point, four fourth quarter and even late third quarter is just an insane time for conferences and summits. But you know, masters of marketing, you've got all the major brands and some not even huge brands talking about strategies, tactics, shiny new objects and other things like that. And you know, I think a lot of people walk away from that having really done some great networking and even learning a couple of things from what's being presented on stage.

[Kameka McCoy]

Yeah, we had a couple of stories come out of that, but would love to kind of get your thoughts on what the biggest takeaways were. I would imagine that a lot of the themes that we've been writing about just kind of holistically showed up at this year's A A's.

[Michael Berkey]

Oh, no doubt about it. I mean there's, you know, the constant debate of brand or performance or brand and performance. I think Mark Pritchard kind of addressed that. But there was also some deep dives into how data can work for you. I think one presentation from AT&T got into thick data which really addresses the qualitative elements of data. When you're doing kind of sit down conversations with survey respondents and finding out more about their emotions and how they feel and how that thick data can then inform the quantitative stuff that we've written a lot about. So I think parsing data in new and different ways to try to divine better insights into how to market to your potential customers is very much top of mind.

[Kameka McCoy]

For sure. For sure. Did. And because it's come up in every other conversation, did AI come up at all?

[Michael Berkey]

Well, I think AI is definitely being leveraged to help kind of get through these swaths of data, both on the quant side and then on the thick data side. But yeah, AI is just the shiny new object everywhere. I was co hosting last week's Digiday Media Buying Summit. I don't think there was a single session where AI didn't come up. And I think that was the same at Masters. I mean, you know, I think a lot of CMOs, given their broader mandates these days, have to be thinking about how AI can impact creative and can impact data choices, can impact media decisions, for sure. And we're seeing that even at the agencies as well, which kind of takes.

[Kameka McCoy]

Us to our first point. Agency earnings have started to wrap up. Right. And from my reading, I'm seeing that a lot of agencies are, or some agencies now, let me say a lot. Some agencies are kind of relying on AI to help cut costs. There's this entire theme of marketers being expected to do more with less. AI seems to be a really good shortcut, at least from their perspective as to how to do that. I have my questions, but that's conversation for another day. Curious, you know, how the agencies shaping up. How is that, how is that good revenue looking? And is AI a part of that?

[Michael Berkey]

Well, look, the agency holding companies love to talk about AI in their earnings reports. And what we're seeing right now is kind of the end of third quarter and the earnings reports that are coming out from the major holding companies, of which I think five out of the six have now reported, they love to mention AI. From what I'm seeing from my reporting, I think that's still a little bit more talk than it is action. Machine learning has been put to use for years, and that's kind of a more rudimentary form of AI, and that's helping with crunching numbers and things like that. AI is now being applied to the creative side of the business and it can certainly create shortcuts where something used to take weeks of ideating or coming up with different concepts can now take minutes or hours given the right prompts. But in terms of actually materially affecting the bottom line, I just don't see that yet.

[Kameka McCoy]

So what is impacting the bottom line? I'd imagine that some agency holding companies perform better than others. So what's the tea?

[Michael Berkey]

Well, right now, based on third quarter and what's looking like the end of the year, you know, the haves continue to have and the have nots are doing their best to have a little bit at the top of the spectrum. Right now you've got Publicis and Omnicom, and I think one of the big drivers for them, and this is a very controversial topic, is principle based buying, which means they're investing in purchasing media and then reselling it to their clients, ostensibly for a better deal, but then they're also taking their little cut of things. And that's got a lot of people upset about it. But it also is an opportunity for the holding companies to return to a little bit of profit making. And right now Publicis and Omnicom are benefiting the most. And we just saw Publicis organic growth was something like 5.8% and Omnicom's was around 6%. And then all the other holding companies are closer to 1, 2% or even stagnant growth. So the haves are still halving, so to speak.

[Kameka McCoy]

We love a business as usual conversation.

[Michael Berkey]

I mean, look, it's going to change at some point because, for example, ipg, which announced its third quarter earnings, just said they want to get deeper into principle based buying, so they might make some headway. And certainly I think an IPG agency just won a decent sized client this week in media. So, you know, it's, it's a horse race right now where, you know, the Seabiscuits and the Seattle Slews are in the lead. But there's a couple of dark horse candidates that are probably coming up around the stretch and we'll see if that changes in a year or two.

[Kameka McCoy]

Yeah, yeah, we'll, we'll keep an eye out and, you know, obviously we'll have more on our side about that. But I want to go back to the idea of kind of marketers being expected to do more with less. I think budgets are, you know, an evergreen topic that always comes up. But Red Lobster has found itself having better days. Beyonce's song wasn't enough to save it a couple years ago. They've got bought by a private equity firm. They've had to shut down locations, but they've got a new cmo. And the CMO comes from Smokey Bones, where she spearheaded the rebrand for the barbecue restaurant. And I think the hope here is that she's going to be able to do that again for Red Lobster. They got a new young CEO and a new cmo, so there are a lot of plans there. But I think what's interesting here is that you're seeing some of these more legacy brands like your Starbucks, right, And Gap and a handful of others where there's a lot resting on their marketers to turn that Brown brand around. Now, some have been able to do it, like Gap. It's to be determined if Starbucks is going to be able to pull that and if Red Lobster is going to be able to pull that.

[Michael Berkey]

I think with Red Lobster, they've got some quite a few challenges, and boy, if all of those fall on the cmo, that's going to be really difficult for her. But, you know, with when the private equity firm bought. Bought the chain out and then kind of sold some of the locations, some of the real estate, and now they're renting back at a profit. They have. This CMO has a lot of chips stacked up against her, but it's indicative of that, this broader problem for CMOs, and maybe why we're seeing shorter and shorter tenure of CMOs all the time. They have to handle not only marketing and sales, but also, you know, data technology infrastructure. There's so many things that now go through the cmo. They're kind of expected to be magicians to solve all these problems, and, boy, that not all of them can always do it.

[Kameka McCoy]

Yeah, I do think Starbucks probably has a better chance now. They've brought in the CEO from Chipotle and they've also brought in the. Their new global chief brand officer, excuse me, is also from Chipotle. And if you recall, a couple of years ago, Chipotle had a real bad fallout with E. Coli. Right. And then even either earlier this year or late last year, a bunch of tiktokers were raising hell about the portion sizes. So Chipotle has found itself in hot water many times. But given that they've been able to turn that around and kind of, you know, stay afloat, I do wonder if, you know, kind of what that signals for Starbucks, if we'll be able to see a turnaround there.

[Michael Berkey]

Well, look, I personally stayed away from Chipotle for about a year myself, and I was a fan of the brand. But, you know, I will admit I would go back now, and I think that CMO did do a pretty admirable job of kind of staying the course, keeping the message relatively simple, focusing back on, you know, kind of Healthy, fresh ingredients. And that seems to have made a lot of people go, all right, they had their problems, they seem to have fixed it. I'm going back to get my burrito. So, you know, I, I would hope that that's going to work for, for Starbucks. We'll see.

[Kameka McCoy]

We shall see. We shall see. The final thing that we've got on the docket is the everything is an ad network conversation that has bubbled up time and time and time again. This time it's Spotify, which has recently launched its own ad, or piloting rather an ad exchange or a supply side platform to help scale its automated ad business. And the plot here is to get Spotify to capture more ad revenue from small and medium sized businesses. Right. It's been a big thing for Meta. I think Spotify is looking to tap into that as well. So we are once again on the cusp of everything is an ad all the time.

[Michael Berkey]

It's kind of crazy. I mean, last I checked, Spotify was already in the ad revenue business, granted smaller than some of its competition. But for them to be in the ad network business is such a clear indication that every company is now looking to figure out some way to monetize their data, which has created this kind of. If you lump in ad networks together with retail media networks, and I know I'm kind of fudging the perimeters of each a little bit, but we're talking like more than 200 different retail media networks and, or ad networks out there. I don't think the marketplace can ultimately sustain all that and we'll see some shakeout. But you know, Spotify certainly has not a unique selling proposition, but a pretty good selling proposition. And if they can figure out how to kind of monetize this properly, they'll be making more money besides taking my, you know, family subscription as a Spotify subscriber.

[Kameka McCoy]

Well, yet, and not for nothing, you know, Spotify has really been kind of rolling out the red carpet here for video and also for creators. So I think they've got a couple of tentacles out there to try to drive some more revenue here, which, I mean, they're already a king player in the space, so I don't know how much more they can squeeze out here. But it'll be interesting to kind of see how that continues to shape up.

[Michael Berkey]

Oh, absolutely. I mean, you know, business extensions, wherever you can find them, need to be pursued because you never know when some sort of revenue stream is going to either dry up or at least soften. So the more tentacles you can get out there. The better chance you have of keeping kind of, you know, the revenue going in the right direction.

[Kameka McCoy]

Absolutely. For sure, for sure. Speaking of everything is an ad network. That takes us back to this week's guest which is Rich Layerfeld. Will brought him on the show from Walmart Connect where he's SVP and general manager talking about the retail media network boom but less from the aspect of the boom itself and kind of more of Walmart connects role in that. What's interesting is Larefield comes from the media buying background and when coming into the retail media network he's now kind of in a sales role. So kind of what does that mean for being able to pitch this service to advertisers to, to keep that revenue stream going? Walmart's obviously one of the big, the big five you could say in the retail media network space. So it was interesting having him on the show to kind of talk about how that's shaping up, what the future of this space looks like and how to keep Walmart on top.

[Rich Laerfeld]

Foreign.

[Kameka McCoy]

Welcome to the Digiday podcast Rich. It's good to have you. How are you?

[Rich Laerfeld]

I'm good, thank you for having me.

[Kameka McCoy]

Of course, of course. One of the things that I like to do on this podcast is start with a fun question. Growing up my dad worked in corporate and for the life of us as children we could not figure out what he did. So one of my favorite questions to ask people in corporate is what does your family think you do for a living?

[Rich Laerfeld]

That's actually a really good question. Obviously I work in Walmart. I think sometimes they think I work in the stores or I think I work in the E commerce business but I do, I try to explain to them that I work in the media business which is a large media company and a large media business that sits on top of Walmart. I think they kind of get it but it is sometimes very difficult to explain the notion of where media is and where it's going. Sometimes it's hard with programmatic and digital media but they are slowly, slowly getting it. So thanks for the question though, of.

[Kameka McCoy]

Course explaining like yes, there's a lot of spreadsheets involved but I promise they'll get it soon.

[Rich Laerfeld]

Yeah, I normally just say like oh I, I work in the stores so.

[Kameka McCoy]

But I don't, I appreciate that answer so much. I will say now just for our listeners, I do know what my dad does so it, it takes a while but we get there eventually. Walmart Connect is celebrating its five year anniversary this year right but in the last 12 to 24 months alone, there has been an influx of retail media networks, of ad networks and things like this. And to be quite honest, if I was to make a drinking game for every retail media network that launched, you know, the players would be in real bad shape. But from your perspective, from where you sit, talk to me about why you think we're seeing such a boom right now.

[Rich Laerfeld]

Yeah, so like you said, we insourced about five years ago when we insourced the business. This notion of retail media, this notion of using data and first party insights to infuse sales at the point of sale, although it had been around for a very long time, media on websites or media in stores has been around for a long time. But this notion of being able to aggregate data, having an impactful platform that can really affect at that point of sale, that can use data in that first party, it hadn't been fully known, obviously there were some folks in the marketplace. But I think what you see is the value of what retail media is and the impact of strong first party sale. The notion that insights and audiences at scale can affect consumers, that engage consumers, platforms that could deliver creativity, delivery, unique insights that can influence that sale. That's what it's about. Media itself, the notion I've been a media buyer for a very long time and the notion of being able to have an entity or a platform that you can get unique insights and unique audiences, an easy to use platform at scale that can engage customers, that can deliver tremendous value to consumers and customers and that have deep insights and measurement, that is why it's growing so much and that's why the impact then if you think about retailers themselves, for the most part it's a lower margin business. This notion of an alternative revenue stream that can add value to generating sales for suppliers or clients or sellers, that can deliver again unique value to customers to give them things maybe they didn't know about products and services and then the measurement piece, that's why the value. And again, as a media buyer, that's what you were looking for. And retail media and the promise of retail media can be able to do that. Or commerce media as all these retail media networks start to expand into financial services or travel companies and other areas.

[Kameka McCoy]

Yeah, and I mean, not for nothing, you gotta mention the elephant in the room which was at one point Google was getting ready to get rid of those third party cookies. They're now back on the table. But I think that made, well, not, I think I know that prioritized or reprioritized that first party data, which I would imagine is also part of the reason you saw some of that influx.

[Rich Laerfeld]

Yeah. And you know, first party data is really important. You're trying to look at large audiences when you're working with partners and that notion of being able to apply those audiences to do better targeting, better insights that drive more efficiencies to your media buys. Again on easy to use platform that you understand what you're getting, that it's safe for your brand and that measurement is really what it's about if cookies stay or not. You know, I don't know the future, but the notion of understanding your customer and understanding to be able to deliver that value is going to be critical in whatever you do. And again, large first party data sets are going to be important whether there's cookies or not cookies in the future.

[Kameka McCoy]

Yeah. Walk me through kind of Walmart Connect's timeline. Right. We're seeing this big boom now, but five years ago when you guys brought it in, would love to know some of the things that we did to I guess meet advertisers demands, what they were looking for and things like that. You know, earlier this year we had Walmart and Vizio. So talk to me kind of about that timeline for you guys.

[Rich Laerfeld]

Sure, sure. So like I said, retail media has been around for a very long time. Whether that was through some type of trade or whether that was through suppliers or what we call suppliers or buyers of product. And we are the buyers of product and the sellers of production, it's been around for a very long time. Whether that was been in some in store media or whether that's been on site or in app media. But the real galvanizing fact over the last 10 years of retail media and the last five for us, it has really been a great journey as a platform for us. We had to really rebuild and rethink our platform. Once we brought it in house, we had to build a strategy that can deliver value for our customers. And that's really what it's about. It has to be customer centric. I think the folks that are building these great retail media platforms know that it has to add value for customers. It has to give them choice, it has to give them what they're looking for. Then you need to focus on what are the value propositions. We focus on what we call supply or mechanisms for creative expression of media that can engage customers that can deliver value, whether that's search or display or you're building up brand platforms on your site for us, or that could be in store and building out in store experiences through events or demos or sampling or that using data off platform. You need to think through all those mechanisms because that's what ultimately our clients or our suppliers or our sellers are really looking for. But you also have to think about a platform that can work for everybody. The notion of automation, the notion of self service is critical. If you look at the largest media platforms, there's been programmatic, there's been auction, there's been self serve, there's been transparency and pricing. And that's where the world has been starting to move towards. And that's also we had to build an easy to use platform that clients can come on and access at scale because we want to make sure we're supporting our largest 1P suppliers, but also all the way down to the smallest 3P suppliers. And then performance is really critical. Whether you're looking at ROAS, whether you're looking at IROs or mid funnel or upper funnel metrics, we need to be able to provide those ways where our clients and our customers can understand what's happening and understand what the impact. So our journey has really been down that path, which is making sure that we have automation so we can reach clients of all sizes. Creative ways that they can engage with us on site, off site or in store, or the performance aspect and making sure that we can prove out the incrementality, make sure we can prove out that impact.

[Kameka McCoy]

Yeah, and like I mentioned, you guys had the deal with Visio. Does that fall under the off platform? Does that fall under the creative?

[Rich Laerfeld]

Yeah, I can't talk much about it. It's still pending the acquisition. But the notion of full funnel is going to be critical for now and for the future. How clients look at both performance or they're looking at more mid funnel or upper funnel. I do believe the funnel's collapsing into the middle because everything is performance. But you're looking at different types of metrics. You might be looking at more brand metrics or more category metrics, or you might be looking at more engagement metrics. You might have a new product, no one knows about your product. Are you looking at more mid funnel or upper funnel? Because you have to make awareness of your product. So I think though the future and when you look at things like Vizio, which have a great impact and a great footprint in more upper funnel to mid funnel, we can bring the lower funnel, it could be a nice marriage to be able to deliver value for our customers or for viewers, our clients and then Walmart, because we can put our products out there for more people to understand what we have at Walmart.

[Kameka McCoy]

Yeah. And we'll stand by for more news there. You mentioned a couple of times throughout our conversation that you've got a background in media buying. Right. You're now on the sell side. So I'm very interested in kind of that. So talk to me a little bit about, you know, the, the jump from the buy side to the sell side. What made you want to make that transition and kind of what has that experience been?

[Rich Laerfeld]

Yeah, it's been an interesting path and I'm, I'm excited. I'm excited I had the chance to do it because I'm not sure everybody's had both sides. Like I said, I was a media buyer, you know, 25 plus years in media buying. I have, I've done experiential marketing, advertising, social performance and upper funnel. And I came to Walmart about five years ago and I did that at Walmart. I worked in the marketing department, I ran performance and brand media, I ran advertising and a few other areas and I loved it. I love the engagement, I love understanding customers across all the categories. And a large Omni retail company and about a year in leadership came to me and said listen, retail media is starting to grow and it's very fascinating and interesting but we want it to grow a little faster. Can you help us make sense of it? And you've been a buyer for media for a long time. Can you help us build something that you would want to buy, that you would feel proud of, that you would partner, you'd want to be a partner on? So we took down the journey to build a short, mid and long term strategy to build a platform that we would be proud of at Walmart that was customer centric. Again, it has to add value to the customer experience. It can't detract from that customer experience because that's what really Walmart is about. It's about supporting our customers that focuses on delivering creative solutions that can support our suppliers and our sellers and supporting them and we can understand what their business challenges are and we can help them grow. Walmart will benefit, the customer will benefit, we will benefit because we can deliver more diversity and more opportunity for our customers to see great product, to learn about great product. But also Walmart because again I talked about the margins of the business. I think we do it really well, but the margins are somewhat smaller, having alternative revenue streams that can go back and feed in keeping our prices low because that's what our value proposition is supporting Our associates supporting automation and innovation that can feed back and it becomes this flywheel. That's really what we were striving to do when we started on this path and building that out. And I feel so privileged and excited that I've had that opportunity that it's kind of played out. There's always been little changes or nuances to the growth, but the plan we kind of set out is really coming to fruition. We feel very proud that what we've built can deliver on everything I just talked about.

[Kameka McCoy]

Yeah, it's an interesting career shift. Right. One that you noted yourself A lot of people haven't had the opportunity to make. So curious. Coming from that background, what were some of the challenges that you saw in the retail media space that your now solving for?

[Rich Laerfeld]

Yeah, I mean in the retail media space, again, it was somewhat undefined industry. So just explaining to people as you asked me to explain, like to my kids, you know, and it's not Walmart. Walmart has some of the smartest people in the world here. But we're a retailer and we're a commerce engine. So explaining the media business and explaining what is needed because we've been buyers, we've been merchants, we've been buyers, we've been store operators. But explaining the notion of what we need from retail, of being a seller, of thinking about it differently, making sure that we have clear lines of delineation between the merchant organization that their sole job is to really deliver great value for our customers, whether that's price or whether that's assortment or whether that's some in store feature that they need to work on to be able to deliver the product to the ultimate customer. And having a separate group, they could then come in maybe and help accelerate our client sales, solve their business problems, but not commingle the two. So within Walmart, just having them understand what a media business is, how do we do it in a customer centric way to add value back into the Walmart ecosystem and to our customers that was probably the bigger challenge versus retail media or other types of media. How do I work within a big, big retail company? And I feel very lucky because the leadership got it and understood if we do it the right way, we do it in a customer centric way, it can really add value to. Again we talk, I say a lot about the customer because it's really critical that can add value and then support the business model.

[Kameka McCoy]

Yeah. Which follow up to that question. Right. You come into this role. But I'd love to know, kind of like what did building out a team or a tool belt, you know, around, you know, those, those challenges and that role look like for you?

[Rich Laerfeld]

We are a full service in house. We have a sales team, we have a marketing team, we have an operations team, we have product team, obviously engineering teams and data and analytic teams. We had to look through all aspects of our business. I always go back to what is our purpose and being really clear about what the purpose of Walmart is and then Walmart Connect and really about how we're really trying to solve business problems for our clients to accelerate sales. It's great that we can lift. We talk a lot about roas, but that's great. But we also have to make sure that we're generating incrementality to their business. And that's a hard thing to measure, it's a hard thing to understand. But we had to build out clarity in our purpose and our value propositions. Our platform were we delivering, truly delivering for our clients and our platform were we prioritizing the right things? Because there's thousands of things you have to get done. Anybody that's building on a retail media network would know. So are we prioritizing the right things that can support that business model and support that customer centricity? Do we have the right partnerships in our business model? People talk in this business a lot about walled gardens or open. In some respects, everybody's business is a little walled garden. But we want it to be as open as possible. And I talk about the partnerships aspect of it. Do we have the right partnerships that can allow us to expand into the openness and be open to many more clients or suppliers? Do we have the understanding of how to build something or do we want to partner? So we want to do that. And the last is like the prioritization really critical understanding, as I said, I think I said it before, which is that prioritization is critical to what you need to do and what comes first, second, third and fourth. So a lot of P's within that.

[Kameka McCoy]

Yeah. Does the makeup of the team and does the makeup of the tool belt change as we move to off platform and brand awareness and things like that and that funnel collapses?

[Rich Laerfeld]

Yeah, yeah, it's a great question. Yes. When we originally started, we had a lot of team members that were really good at performance, probably more commerce, media shopper, marketing relationships. We started with really working with the commerce people or the business people or the commercial people at our suppliers. And our largest one piece suppliers is where we kind of started. As we started to expand into mid funnel Upper funnel, as you said, off platform stuff. We started having to talk to different types of, of people. We had to build out an agency team who had relationships with agencies, understood what agencies want because they're important partner for us. We had to hire people that understood DSPS or off platform programmatic people that understood API partnerships and those types of relationships, they're all critical. So we brought on over the last couple years, people have different backgrounds from maybe more traditionally you'd say upper funnel to combine with the folks that have the commerce engines or the shopper marketing engines. And that's really filled out really nicely, not only from an expertise perspective but from a culture perspective. Bringing different types of people from different types of company that have different perspectives. That's what we've done. And it's been exciting to see that come together, exciting to see the culture grow. I'm very proud of how we operate from a Walmart perspective. That's incredibly important culture, but how we brought it to Walmart, connect, to infuse the traditions and all the wonderful things of Walmart and what Sam Walton brought and built and has expanded over the years to this new infusion of technology and media. It's exciting to see my partners throughout Walmart who have never worked with media people before and it's an interesting sort of collaboration with them. So yeah, been great.

[Kameka McCoy]

I want to take a step back. Back. Right. I think retail media is having a moment right now, but like you said, it's not necessarily a new phenomenon. It's, it's been here for a while when you start talking about in store displays and things like that. So I'd love for you to kind of walk us through the brief history of retail media networks and you know, how was it defined then and how is it defined now?

[Rich Laerfeld]

Yeah, I think we were talking a little about this earlier in one of your questions. I'm not sure I can explain what it was and what it isn't. I do think maybe back in the day you're talking about 15 plus years ago, maybe it was a trade medium, it was an in store or there were some digital banners. I don't think the audiences were really clear. I don't think that access to first party data was really clear. I don't think the measurement was really clear. But as the world of digital started to evolve, as the notion of scaling large audiences and being able to use that in a way that can harness the power for your clients or advertisers and this notion of impacting at the point of sale on the Digital side using data. So I guess maybe you would say that the notion of retail media is truly on platform point of sale, impacting that sale through that, through search or display or some other mechanism. But now it's retail media infused. So off platform, using data and insights in a safe way to be able to use audiences to buy, to operationalize then to ultimately measure that's sort of this new medium. And maybe you say media is media, retail is retail and you're kind of bringing together and then this notion of broader commerce is starting to play. People are starting to talk about this notion of commerce because they're starting to now bring in again, like I said, travel or financial services or other first party. But what I would say is what a win in the end is scale. The ability to have unique audiences, to be able to apply it to a platform in an easy to buy way, in a scalable, easy to use way and impact at the point of sale. Some people are touting retail media, but I'm not sure there's a point of sale mechanism to be able to truly measure that impact unless you're using third parties to do that. And I'm not sure that really qualifies. But again, I think that the boat can be very big and open to everybody. I'm excited about the industry, I'm excited about where things are going. I'm excited about the opportunity really for clients to have new mechanisms to engage with customers and have real impact in their campaigns. Because it's really hard, as I said, I was being a buyer, it's really hard to find great audiences and to see the impact that those audiences can really deliver for your brands.

[Kameka McCoy]

Rich, I'm laughing right now because you said I don't know if I can explain this and then proceeds to explain it very eloquently.

[Rich Laerfeld]

I think I talked around in circles, so I don't know if I really did it that well. But if there's anything in there that you want to use, feel free.

[Kameka McCoy]

That was a very good history lesson. You touched on this idea of like the, the fragmentation that's kind of happening here, you know, where you're starting to see more it being broken down into niches and things like this. Right. Even going to off platform and whatnot, which kind of signals where we may be going in the future. So talk to me a little bit about what does the future of retail media networks look like in your opinion and kind of where does Walmart connect fit into that?

[Rich Laerfeld]

Yeah, I know people talk about this notion of consolidation in retail media Obviously retailers themselves will be hard to consolidate, I don't think unless someone's buying someone. But you're talking about hundreds if not thousands of retailers that are trying to get into the space. So the notion of combining will probably be really hard. I do think though the large will continue to bring in house because they'll be able to deliver those large audiences that will ultimately help them drive their businesses. So they'll continue to bring in house. And then I think more the mid to smaller ones, maybe they don't consolidate but they go to aggregation and have third parties to come in to really help them. There's lots of third parties out there that are helping retailers kind of aggregate and then that's easier for clients or mix those clients and advertisers with same folks or partners, advertisers to be able to consolidate the buying because that's really going to be important. You have to make it really easy for brands or agencies to buy. And if they have to go to hundreds of different places, it's going to be really hard. So then the smaller ones or the mid tier, the smaller ones are going to really struggle aggregating the demand into their platform. So maybe there's a lot more aggregation. So the large ones like Walmart Connect continue to insource. We can drive people to a really easy to use platform, both our seller center but also off platform through partnerships like the Trade Desk or our dsp. There'll be more consolidation in how we operate and then there'll be maybe an end business. There's aggregation into maybe some of the smaller which will benefit them because then they'll be able to get the impact of buyers buying into their platform.

[Kameka McCoy]

Yeah, absolutely. And before I let you go, I'd love to know kind of what is the path ahead for Walmart Connect look like.

[Rich Laerfeld]

So I think we kind of talked about many different areas but for us it's really three areas that we're, I mean three major areas we're focused on. For us it's really continue our path of how do we create new ways for our brands or advertisers to really connect with customers. We talk about again on platform, we talk about in store and off platform, but we'll continue to increase our partnerships. You know, we're making a lot of inroads in ctv. We've taken our latest announcement for Disney that proof of concept, for example, to expand that to a much larger access for our clients to be able to access that connected TV inventory. We've announced the Walmart creator which is really an influence collaboration sort of tool where brands our clients can come in and access in a self serve way, engage with influencers and help move their products. The second piece is really supporting what I said is increasing access of all sizes, brands for all sizes, whether that is again our largest 1p all the way down to our marketplace. Sellers moving to a more automated, more self serve. We just announced more automation into self serve social. So getting them access where they can get those audiences, they can engage on social media platforms and we can give all the measurement for how the impact of their sales are happening. And the last one is really the performance and the solution making sure that we can prove out the incrementality of everything we do. So things like search incrementality, search incrementality even for in store, when someone's searching in store or prior to going in store, making sure we can capture the sales. And then automated campaigns. There'll be much more push into automation and computers giving much more recommendations into their campaigns. Humans are great and there's lots of tools and they want to put their keywords in but computers do a really good job. And we're seeing the more automation and the more ability to let computers look at your information and your data and then impact your campaigns, we're seeing much more lifts in their performance. So those three things, new ways to connect access for brands of all sizes. And the last one, it's just really that performance and the value creation for our clients.

[Kameka McCoy]

Absolutely. We talked about the history of retail media networks, we talked about what's happening next and you really let me pick your brain. I really appreciate that and I appreciate you stopping by the podcast today. It's, it's been a pleasure.

[Rich Laerfeld]

Well, I appreciate your interest. I appreciate the podcast. I love coming on. You have a very easy way to present and get a lot out of of me. So thank you.

[Kameka McCoy]

Absolutely. Well, that brings us to the end of this episode of the Digiday Podcast. Thank you to everyone for listening and please don't forget to share this episode with someone who you think would enjoy it. You can even rate us and leave us a comment on Apple Podcasts. We'll be back next week with another episode of the Digiday Podcast. Thank you so much for joining us.