Walmart makes money in a variety of ways – from selling groceries and general merchandise in over 10,000 stores worldwide, to offering financial services, to running an e-commerce empire that rivals Amazon. Of course, the bulk of revenues still comes from its core retail business. But Walmart has cultivated additional revenue streams to complement its stores including services, subscriptions, healthcare offerings, and advertising.
Let‘s dive into each of Walmart‘s money-makers for 2024 and see what‘s driving growth for this retail juggernaut.
Massive In-Store Retail Sales
The foundation of Walmart‘s business model continues to be sales of merchandise ranging from consumer staples to home goods to electronics across its vast brick-and-mortar footprint. As the largest grocer and retailer in the U.S., Walmart sold $341 billion worth of products in its stores in 2022 [1].
Walmart divides its retail offerings into five main merchandise units:
Grocery
Accounting for 56% of Walmart U.S. sales, this category contains everything from fresh produce to baked goods to packaged and frozen foods. Walmart is the #1 grocery retailer in America, with the average Supercenter carrying over 140,000 items [2]. This massive selection and one-stop convenience appeals to time-strapped families.
General Merchandise
This sector encompasses home furnishings, electronics, toys, clothing, and more – basically anything that‘s not food. General Merchandise makes up 32% of U.S. sales [3]. Walmart employs an "opening price point" value strategy with low everyday prices supplemented by rollbacks and special buys.
Health and Wellness
This category contains Walmart‘s pharmacies, optical centers, clinical services, and over-the-counter medications. Health and Wellness accounts for 10% of U.S. sales [3]. Walmart uses its negotiating heft to offer many generic prescriptions for just $4.
Entertainment
Walmart stocks all the latest video games, movies, music, and books to entertain customers. Entertainment makes up a relatively small 0.7% of U.S. sales [3].
Apparel
With clothes and accessories for all ages and genders, Walmart‘s apparel selection rounds out its retail offerings. Apparel is 0.3% of U.S. sales [3]. The George private label provides basic apparel at very low prices.
Beyond just having merchandise shoppers want, two factors allow Walmart to maximize profits:
Walmart‘s Private Label Brands
Private labels like Great Value (food), Equate (health and wellness), and George (clothing) carry higher margins for Walmart as it controls sourcing and pricing. Store brands account for 20-25% of Walmart‘s sales.
Efficient Supply Chain
Walmart pioneered supply chain innovations like cross-docking and RFID tracking to minimize costs. Combined with its purchasing power, Walmart can obtain goods at extremely competitive rates and still make strong gross margins.
This winning strategy of leverage + efficiency has made Walmart the #1 retailer in the world.
Major Investment in E-Commerce
While in-store sales still represent over 85% of Walmart‘s revenue, e-commerce is a massive area of investment and growth. Walmart‘s online sales grew 79% in Q1 2023 vs a year prior [4]. It has rapidly expanded services like:
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Online Grocery Pickup – Customers order online and drive to the store where employees load their car. adoption grew to 35% of U.S. households in 2022 [5].
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Delivery Unlimited – Walmart‘s same day delivery service for groceries and general merchandise. Launched in 2019.
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Curbside Pickup – For online orders of general merchandise. Available at over 3,400 stores with 230,000 pickups per day [5].
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InHome Delivery – Employees deliver groceries directly to a customer‘s fridge (!) Available in certain markets.
Walmart is aggressively challenging Amazon in e-commerce and leveraging its store network for omnichannel fulfillment. Its seamless shopping experience and low prices builds loyalty with busy families.
Revenue From Services
Beyond physical and digital merchandise, Walmart also generates revenue through various services offered in-store and online.
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Financial Services – Walmart‘s MoneyCenters provide wire transfers, check cashing, bill pay, money orders, prepaid cards, and other services. These generated over $760 million in fees in 2022 [6].
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Vudu – Even after selling this video streaming platform to Fandango in 2020, Walmart maintained a revenue share agreement and continues to promote it.
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Healthcare Services – As of March 2022, Walmart operated 22 health centers providing primary care, counseling, dental, vision, x-rays, and lab tests on a fee basis [7]. It plans to open hundreds more clinics over the next few years [8].
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Insurance Services – Walmart partners with insurance companies to sell Medicare, dental, and health plans. This segment produced over $1 billion in revenue in 2021 [9].
Though small compared to overall sales, these services provide Walmart with over $2 billion in high-margin, recurring income beyond just moving product.
Walmart+ Memberships
In September 2020, Walmart launched its own membership program called Walmart+ to compete with Amazon Prime. For $98 per year or $12.95 per month, members get benefits like [10]:
- Free unlimited delivery from stores
- Fuel discounts at Walmart, Murphy USA, and Murphy Express gas stations
- Early access to deals and restocked inventory
- Scan & Go contactless mobile checkout in stores
Though Walmart has not released official subscriber numbers, analysts estimate Walmart+ has between 7-8 million paying members as of early 2022 [11]. With membership fees of around $100 per year, that translates to $700 million+ in incremental recurring revenue.
The program incentivizes customer loyalty and provides a predictable income stream as Walmart continues adding benefits to stand out versus Amazon Prime.
Advertising: Walmart Connect
Like Amazon, Walmart is leveraging its first-party shopper data and massive reach to build an advertising platform to help brands promote and sell products.
The self-serve Walmart Connect platform allows advertisers to [12]:
- Create targeted digital campaigns to specific customer segments
- Optimize ads to reach shoppers when they‘re browsing relevant products
- Measure campaign performance using Walmart‘s data
Walmart‘s ad business is still nascent, producing around $500 million in 2021 revenue [13]. However, Walmart expects advertising to become a $1 billion business in 2022 and has bold ambitions to scale it to a $4-5 billion segment by 2025 [14].
The high margins from advertising provide an incremental revenue boost on top of Walmart‘s core retail earnings.
Walmart Keeps Low Prices While Growing Profits
Walmart‘s ability to offer rock-bottom prices across categories is the driving force behind its massive $572 billion in annual revenue [15]. Its sales volume, efficient supply chain, and fixed costs leverage allow Walmart to drive strong profitability even as it maintains its "Every Day Low Price" commitment.
Walmart generated $34 billion in operating income on its $573 billion in revenue in 2022 for a 6% operating margin [15]. That‘s impressive for a discount retailer – rival Target had a margin of 8.3% in 2021 [16].
Even with thin margins, Walmart‘s sheer size means it generated more operating profit than Target ($8.9 billion), Costco ($5 billion), and Best Buy ($3 billion) combined [16].
Walmart strikes a profitable balance between value prices to drive high volumes and extracting every efficiency in supply and operations to grow earnings. This formula has made it the world‘s largest retailer and a profit machine.
The Bottom Line
To summarize, here are all the ways Walmart monetizes its business:
- Massive in-store retail sales of grocery, general merchandise, apparel, and more
- Rapidly growing e-commerce sales
- Service revenue from financial offerings, healthcare clinics
- Walmart+ membership fees
- Emerging advertising income
Its core business will always be selling products at market-leading value. But complementary income streams from services, subscriptions, ads, and more will provide incremental profits on top of its unmatched retail machine.
Walmart‘s diversified revenue mix funds continued expansion of its stores, e-commerce capabilities, and supporting services to better serve customers. Its growth runway is as long as ever.
Sources:
[1] Walmart 2022 10-K Filing [2] Walmart Grocery Facts [3] Walmart 2022 10-K Filing [4] Walmart Q1 2023 Earnings Release [5] Walmart Q4 2022 Earnings Call Transcript [6] Walmart 2021 10-K Filing [7] Walmart Health Locations [8] Walmart to Expand Healthcare Clinics [9] Walmart‘s Healthcare Strategy [10] Walmart+ Benefits [11] Walmart+ Subscriber Estimates [12] About Walmart Connect [13] Walmart Chasing Retail Media Dollars [14] Walmart 2021 Investor Day Transcript [15] Walmart 2022 10-K Filing [16] Target, Costco, Best Buy 2021 10-K Filings
