The King of Retail: A Dive into the Past, Present, and Future of Walmart through its acquisition of VIZIO

Source: Walmart

Beyond ruling a country, those who excel in their fields are often revered as kings by the public. Like Elvis, the King of Rock and Roll, or Lebron James, the King of Basketball (even though MJ is my GOAT). In that same spirit, I think it's fair to crown Sam Walton as the King of Retail.

Source: Google Play

The past few days have been a blend of emotions for me. On one hand, I’m finally getting a breather from my summer internships. On the other, the reality is setting in that summer is coming to an end, and I’ll be moving back to campus next week. Despite the looming end of summer, I think I’ve used my recent free time wisely, diving back into my marathon of biographies and autobiographies since the start of 2024. This time, I picked a book that couldn’t be more timely, given that I’m starting a blog centered around the consumer retail sector—the autobiography of Walmart’s founder, Sam Walton: Made in America.

Honestly, I could talk all day about this book. As someone fascinated by finance, entrepreneurship, and the consumer retail space, I’m surprised it took me this long to read it. Walton's story is packed with timeless lessons that remain relevant to retail today. I’m excited to share some of my key takeaways from the book and tie them into today’s deal analysis: Walmart’s acquisition of VIZIO.

On February 20, 2024, Walmart announced its agreement to acquire VIZIO, including its SmartCast Operating System (OS), for $11.50 per share in cash, totaling $2.3 billion in fully diluted equity value. This acquisition positions Walmart to engage with its customers in innovative ways through advanced television and in-home entertainment experiences.  But to believe that Walmart’s multibillion-dollar investment is focused on producing and selling TVs faster, better, or at a lower cost than Vizio overlooks the real purpose behind the acquisition. While this deal reflects Walmart's ongoing expansion into the media space, it also stands as a natural evolution of strategies that have guided the company from its inception— learning from competitors, leveraging new technologies, and gaining insight from data. To truly grasp the significance of this acquisition, it's essential to look at how it ties into the larger narrative of Walmart's journey—from its founding under Sam Walton to its current position as a global retail powerhouse.

Company Overviews:

This overview of Walmart is pretty long, but if even just one of you out there is down to dive into this rabbit hole of Walmart’s beginnings with me, it’ll make writing this worth it.

Walmart

Sam Walton’s journey with Walmart began in 1918 when he was born in Kingfisher, Oklahoma. Walton’s upbringing during the Great Depression played a crucial role in shaping his attitude toward money, discipline, and hard work. His family struggled financially, with his father working as a mortgage broker, often foreclosing on struggling farmers during the Dust Bowl. These experiences instilled in Walton a deep sense of frugality and determination to succeed.

Walton showed early entrepreneurial spirit, selling magazine subscriptions, rabbits, pigeons, and managing a newspaper route. After excelling in high school as the quarterback of his undefeated football team, Walton attended the University of Missouri, where he further honed his business acumen by running his newspaper route like a mini enterprise, even hiring others to help him as he focused on studies and campus leadership.

Walton's First Store in Newport, AR. Source: The Walmart Museum

After graduating, Walton began his retail career at JCPenney in Des Moines, Iowa. However, his retail ambitions soon shifted when he met and married Helen Robson. Helen, from a wealthy and business-savvy family, encouraged Walton to pursue ownership over employment. Together, they purchased a struggling Ben Franklin variety store franchise in Newport, Arkansas, using a $20,000 loan from Helen’s father and $5,000 of their savings.

Despite entering an already competitive market with unfavorable lease terms, Walton applied his keen observation skills and relentless work ethic to turn the store around. He would frequently visit competing stores, particularly a Sterling Store across the street that was performing much better. Walton became notorious for taking notes, studying competitors, and adapting their successful strategies for his own store.

One of Walton’s key innovations was experimenting with lowering prices and focusing on high-volume sales. Although the idea of discounting seems obvious today, Walton was one of the first to discover that by cutting prices significantly on key items, he could drive far more customer traffic and make up for the lower margins with volume. Today, this strategy of discounting—often offering products at or below cost—has become a fundamental aspect of Walmart’s long-term success.

Walton also realized that controlling costs at the supplier level was critical. Rather than solely relying on his franchisor, Butler Brothers, to provide inventory, Walton started sourcing goods directly from manufacturers, further reducing costs. This hands-on approach, from driving to manufacturers himself to hauling goods back in his pickup truck, allowed Walton to undercut competitors and deliver on his promise of lower prices.

After successfully growing the Newport store to over $250,000 in annual sales, Walton faced a major setback when his landlord refused to renew the lease. The landlord, seeing how successful Walton had become, wanted to take over the store. This was a crushing blow, but Walton didn’t give up. With the $50,000 payout from the sale of his assets, he and Helen packed up and moved to Bentonville, Arkansas.

In Bentonville, Walton purchased another Ben Franklin store. Here, he implemented another radical innovation by adopting a self-service model, allowing customers to browse and select their own merchandise, a concept that seems so intuitive today but was new to retail at the time. Walton claims that he got the idea from reading about a few Ben Franklin stores in Minnesota that had adopted the self-service concept— once again showcasing his ability to learn from or, as he says himself, “copy” competitors. Sam Walton was never shy to admit that he took ideas from others and implemented them in his own stores. He even famously said, “Everything I've done, I've copied from someone else.” At the end of the year, he rebranded the Bentonville store as "Walton's Five and Dime," stepping away from the Ben Franklin name, and his store quickly became a success, with sales reaching $90,000 in its first year.

First Ever Walmart in Rogers, AR. Source: Reader's Digest

Over the next several years, Walton continued to expand, opening additional stores in nearby towns, including Fayetteville. He developed a unique partnership model, allowing store managers to have a stake in the success of their individual stores through profit-sharing and investments in future stores. This incentive structure, combined with Walton’s relentless focus on customer satisfaction, low prices, and operational efficiency, became the cornerstone of Walmart’s explosive growth.

By 1962, Walton opened the first Walmart store in Rogers, Arkansas. Gonna take a quick detour here to give some context for the origin of the name “Walmart” from Walton’s autobiography. Pretty much, Walton had a bunch of names in mind, and he's been talking with one of the early store managers, Bob Bogle, about his ideas.

“He says, what do you think? Bob says, you've got all these fancy names, but it's pretty expensive. Building the neon signs of Walton's Five and Dime and Ben Franklin. That's a lot of letters. What if you just take part of the Walton name, keep that, make it a place to shop, and call it Walmart? Seven letters that'll be pretty cheap.”

So in the most Walmart fashion possible in cutting costs, Walmart was born, and the rest is history.

Walton’s vision for Walmart was built on a simple, yet powerful principle: always offer the lowest prices. This mantra, along with a commitment to innovation in logistics, supplier relationships, and store management, allowed Walmart to grow from a single store in rural Arkansas to the largest retailer in the world.

The decade following the first store's launch would see Walmart grow exponentially and transform the retail industry. To fuel Walmart’s expansion, Walton realized the importance of building a robust logistics network. Instead of relying on distributors, Walmart focused on creating its own distribution centers to optimize inventory management and reduce costs. This move was revolutionary at the time, as most retailers did not own their own distribution networks. By the mid-1960s, Walton had opened more stores in Arkansas and neighboring states, including Missouri and Oklahoma.

Certificate for 100 shares of Wal-Mart Stores, Inc. stock, issued to Sam Walton. Source: The Walmart Museum

By 1970, Sam and his brother Bud had successfully opened 38 Walmart stores, generating over $44 million in annual sales. However, in order to continue growing, they needed more capital and found themselves heavily in debt to nearly every bank in Arkansas and southern Missouri. Realizing that they needed a new solution to keep expanding, they decided to take the company public. In October 1970, Walmart went public with an offering of 300,000 shares traded over the counter. Within less than two years, the stock had quadrupled in value and began trading on the New York Stock Exchange. With the stock selling on the New York Stock Exchange, Walton raised enough capital to support Walmart’s rapid expansion across the U.S., and by the end of the decade, the company had nearly 300 stores and was generating revenues of $1.2 billion annually.

With the rapid expansion of Walmart in the 1970s, Walmart started implementing a strategy that would further distinguish it from competitors: the early adoption of technology to streamline operations. Walton understood that staying competitive required more than just opening stores—it required efficiency at every level of the business. He embraced technology such as barcode scanning, which allowed Walmart to track inventory with unprecedented precision. This move not only improved in-store operations but also enabled Walmart to keep prices low by reducing the cost of overstocking and stock shortages.

In 1983, Walton made one of the most pivotal moves for Walmart in investing in a satellite system. This $24 million investment, one of the first of its kind for a retail company, connected all of Walmart’s stores and distribution centers to the corporate headquarters in Bentonville, Arkansas. The satellite network allowed real-time communication and data sharing between stores, providing Walmart with an unparalleled ability to manage inventory, track sales, and ensure the efficient distribution of goods. This technological edge further reduced costs, reinforcing Walmart’s ability to offer lower prices than competitors.

The latter half of the 1980s brought another significant innovation for Walmart: the introduction of the Walmart Supercenter. In 1988, the first Walmart Supercenter opened in Washington, Missouri. This new format combined a traditional discount store with a full grocery store, offering customers the convenience of one-stop shopping. The Supercenter model allowed Walmart to compete with grocery chains as well as general merchandise retailers, and it soon became a core part of Walmart’s strategy.

Walmart in Queretaro, Mexico. Source: Wikipedia Commons

By the 1990s, Walmart Supercenters were spreading rapidly, cementing Walmart’s dominance not only in retail but also in the grocery industry. Sam Walton passed away in 1992 after a prolonged battle with two types of cancer: hairy-cell leukemia, which weakens the immune system by attacking white blood cells, and a bone-marrow cancer called multiple myeloma. But by the time he passed away, his legacy was firmly established. Under his leadership, Walmart had grown from a single store in Rogers, Arkansas, to a national and international retail powerhouse. The company’s guiding principles of low prices, operational efficiency, and customer satisfaction remained core to its success, even after Walton’s death. As his son Rob Walton took over as chairman of Walmart’s board, the company’s expansion efforts continued unabated. Walmart’s entry into international markets was a major focus during this time. In 1991, Walmart entered Mexico through a joint venture with the Mexican retail company Cifra, marking the beginning of Walmart’s global presence. Shortly afterward, in 1994, Walmart entered the Canadian market by acquiring 122 Woolco stores. This aggressive international expansion continued, with Walmart establishing a foothold in countries such as Argentina and Brazil in 1995 and in Germany and South Korea in 1998. During this period, Walmart's innovative logistics and supply chain models became even more sophisticated. Its distribution centers were fine-tuned, and the satellite system that Walton had implemented in the 1980s helped streamline operations. These moves positioned Walmart to become a dominant force in global retail.

In 2000, Walmart made a pivotal leadership shift when H. Lee Scott Jr. became CEO. Scott's tenure focused on adapting Walmart’s supply chain to the increasing digitization of retail and modernizing the company’s environmental and social responsibility practices. One of Scott’s early moves was launching Walmart.com in 2000, marking the company’s entry into e-commerce. Initially, Walmart.com was relatively slow to catch on compared to e-commerce competitors like Amazon, but the platform laid the groundwork for the company’s digital ambitions. Scott also recognized the growing competition from other big-box retailers, including Target, as well as the e-commerce threat from Amazon, which was rapidly expanding its online dominance.

Under Scott’s leadership, Walmart also took strides toward international growth. In 2002, Walmart expanded further into Asia by acquiring stakes in Seiyu, a Japanese retail company, marking its entrance into the competitive Japanese market. This period also saw significant expansion in the UK with Walmart’s acquisition of the British supermarket chain Asda in 1999. Despite these successes, Walmart faced setbacks in some international markets. For example, its venture in Germany in the 1990s struggled due to cultural differences and competition from established local retailers. By 2006, Walmart had pulled out of Germany and South Korea. These setbacks highlighted the challenges of applying Walmart’s U.S.-based business model to foreign markets.

As the 2010s began, Walmart found itself grappling with an increasingly digital world. The rise of e-commerce, particularly Amazon, was dramatically altering the retail landscape. To stay competitive, Walmart began investing heavily in its online capabilities and integrating technology into its operations.

In 2014, Walmart brought on Doug McMillon as its new CEO, marking another generational shift in leadership. McMillon, who had worked his way up through Walmart after starting as a summer associate, was instrumental in steering the company toward a more digitally integrated future. Under his leadership, Walmart made significant investments in its online platform, Walmart.com, and began pursuing an omnichannel strategy to integrate physical stores with its e-commerce business.

Source: Crain's New York Business

One of McMillon’s most important moves came in 2016 when Walmart acquired Jet.com for $3.3 billion in a bold move to compete directly with Amazon in the online retail space. Jet.com’s founder, Marc Lore, was brought on to lead Walmart’s U.S. e-commerce operations, and the acquisition bolstered Walmart’s ability to serve online customers with a broader selection of products and more competitive pricing. The Jet.com purchase was part of a larger digital transformation strategy that saw Walmart improve its website, expand its online grocery services, and introduce in-store pickup for online orders. However, despite initial success, Jet.com struggled to deliver the expected growth, and in 2020, Walmart decided to discontinue Jet.com, as its digital operations had shifted to a more store-centric fulfillment strategy​.

Despite discontinuing Jet.com, Walmart continues to commit to a digital transformation and has invested heavily in omnichannel retailing, combining the strengths of its vast network of brick-and-mortar stores with its growing online platform. After discontinuing Jet.com, Walmart introduced Walmart+ in 2020, a membership program offering perks like unlimited free delivery, similar to Amazon Prime. Walmart+ was designed to drive customer loyalty and keep Walmart competitive in the face of Amazon’s dominance.

More recently, Walmart’s grocery business also underwent a transformation, with the company becoming a leader in online grocery delivery and curbside pickup. This move proved especially valuable during the COVID-19 pandemic when demand for online grocery services surged. Walmart’s robust store network allowed it to scale its grocery operations quickly, giving it an edge over competitors who lacked physical locations.

Finally, today, Walmart remains the largest retailer in the world, with more than 11,000 stores across 27 countries and an increasingly strong online presence. The company generates over $600 billion in annual revenue and continues to innovate with new technologies, such as artificial intelligence, robotics, and automation, to stay competitive in the evolving retail landscape. In Walmart's recent earnings report for Q2 FY25, the company posted strong financial results with total revenue reaching $169.3 billion, a 4.8% increase compared to the same period last year. Walmart's operating income grew 8.5% to $7.9 billion, reflecting the company’s focus on driving higher returns and diversifying its business model. Adjusted earnings per share came in at $0.67, up 9.8%. Furthermore, Walmart U.S. experienced 4.2% growth in comparable sales, while its international operations saw a net sales increase of 8.3% (in constant currency), demonstrating solid performance across regions. Sam's Club also showed strength with a 5.2% growth in comparable sales.

Source: RTINGs.com

VIZIO

Founded in 2002 and headquartered in Irvine, California, VIZIO is a prominent American consumer electronics company known for its affordable, high-quality smart TVs and sound bars. The company was established by William Wang with the mission of making advanced home entertainment technology accessible to the average consumer by offering cutting-edge products at competitive prices. VIZIO quickly rose to prominence, particularly for its smart TV offerings, which combine affordability with high-end features typically found in more expensive brands. This emphasis on value has allowed VIZIO to carve out a significant share of the U.S. smart TV market.

A defining feature of VIZIO’s product lineup is its SmartCast operating system, a platform that integrates popular streaming services like Netflix, Hulu, and Disney+, providing users with a seamless and user-friendly entertainment experience. The system is designed to act as a comprehensive hub for live TV, on-demand content, and apps, all within one interface. In addition, SmartCast supports voice controls through Google Assistant and Alexa, further enhancing the customer experience by allowing easy navigation and content search. VIZIO’s sound bars, known for delivering high-quality, immersive audio, complement its TV products, making the company a go-to choice for a complete home entertainment system.

Beyond consumer electronics, VIZIO has established itself as a key player in the advertising and data sectors. Its Platform+ business leverages the SmartCast operating system to provide targeted advertising solutions, using Automatic Content Recognition (ACR) technology to gather data on viewers' habits. This technology allows VIZIO to deliver highly targeted ads to its users, making it an attractive platform for brands looking to engage with consumers in a more personalized and effective way. VIZIO’s success in the connected TV (CTV) advertising market has significantly contributed to its growth, and its advertising business has become a major part of its overall strategy.

In 2021, VIZIO went public, listing on the New York Stock Exchange under the ticker VZIO. The company’s strong performance has been driven not only by its popular smart TVs and sound bars but also by the rapid growth of its advertising and data-driven services. By 2024, VIZIO’s SmartCast platform boasted over 18 million active users, and its advertising business accounted for the majority of the company’s gross profit. Through its dual focus on delivering high-quality entertainment products and harnessing data to power its advertising business, VIZIO has become a leader in both consumer electronics and the growing CTV advertising market.

Financially, VIZIO reported a net revenue of $437.3 million in Q2 FY 2024, an 11% increase year-over-year (YoY). VIZIO's Platform+ segment, which includes its advertising and data-driven services, saw significant growth, with net revenue up 19% to $169.4 million and gross profit rising 15% to $98.6 million. The SmartCast Average Revenue Per User (ARPU) increased 16% to $35.39, reflecting VIZIO’s expanding monetization of its platform. Operational highlights include the addition of 18.8 million SmartCast Active Accounts, which streamed 5.6 billion hours during the quarter, up 13% YoY. VIZIO also continued to expand its direct advertising relationships and introduced new advertising products and content hubs. However, the company reported a slight decline in net income, coming in at $0.2 million, down from $1.9 million in the previous year, reflecting higher operating expenses and acquisition-related costs​.

Source: Market.Us

Industry Overview

The global department store market is projected to grow from USD 139.3 billion in 2023 to USD 208.1 billion by 2032, with a compound annual growth rate (CAGR) of 4.7% between 2023 and 2032. Department stores play a vital role in the retail sector by offering a wide range of products under one roof, including apparel, electronics, home goods, and beauty products. However, the industry has experienced significant changes in recent years due to the rise of online shopping and evolving consumer preferences.

Many traditional department stores have struggled to adapt to these changes, resulting in store closures and bankruptcies. Those that have survived have heavily invested in their digital platforms and embraced omnichannel shopping experiences, which combine the convenience of online shopping with the in-store experience. In this competitive market, retailers vie for customers through pricing, service quality, and product offerings.

Consumer spending is a key driver of the department store market, as higher disposable incomes increase customers' willingness to shop. Technological innovations are also crucial in keeping department stores relevant, with investments in digital tools such as mobile payments, virtual reality, and augmented reality enhancing the shopping experience. However, the rise of e-commerce and the proliferation of discount retailers and fast fashion brands pose significant challenges, leading to reduced foot traffic in many department stores.

Despite these challenges, there are growth opportunities in e-commerce, which allows department stores to reach broader audiences and create seamless shopping across various channels. Additionally, trends in sustainability and ethical sourcing offer stores a chance to differentiate themselves by providing eco-friendly products. The rise of experiential retail, which focuses on engaging in-store experiences, presents another opportunity for department stores to stand out.

In recent years, some department stores have succeeded by enhancing their online platforms, improving in-store experiences, and refining their product offerings. Smaller, specialized departments that cater to niche audiences are also becoming more popular. The use of new technologies, such as virtual and augmented reality, is further helping stores provide an enhanced shopping experience.

In terms of market segments, hardline and softline products, such as home decor and furniture, made up the largest revenue share in 2023. The apparel and accessories segment, driven by fashion trends and consumer spending on clothing, is expected to be the fastest-growing sector. Large department stores hold the dominant market share due to economies of scale, while small department stores are growing faster due to their personalized services and unique product offerings.

Regionally, North America leads the market with a 46.4% revenue share, driven by urbanization and the presence of major players like Target and Walmart. Meanwhile, the Asia-Pacific region is expected to grow the fastest, with a CAGR of 5.6%, fueled by increasing digitalization, urbanization, and rising disposable incomes, particularly in markets like India.

The COVID-19 pandemic had a severe impact on the department store market, causing significant declines in revenue due to store closures and supply chain disruptions. However, it also accelerated trends toward e-commerce and omnichannel retail, helping some stores recover by moving their operations online and focusing on essential products and home goods.

VIZIO SmartCast Operating System. Source: VIZIO

Deal Rationale:

At first glance, acquiring a television manufacturer might seem like a step toward hardware dominance, but the true value lies in Vizio’s SmartCast operating system and its growing influence in the ad tech ecosystem. This deal positions Walmart to take advantage of the surging connected TV (CTV) market, which is projected to grow to $30.1 billion by 2024. With more consumers shifting from traditional cable TV to streaming, Walmart is stepping into one of the fastest-growing advertising sectors.

This acquisition also aligns with Walmart’s long-standing effort to compete more aggressively with Amazon, which dominates the retail media advertising landscape, holding over 75% of the U.S. market. While Walmart has made significant strides with Walmart Connect, its own advertising business that generated $3.4 billion in 2023, the company has yet to reach Amazon’s scale. Acquiring Vizio allows Walmart to integrate CTV advertising into its platform, much like Amazon’s Fire TV has bolstered its own media ecosystem. Through Vizio’s SmartCast platform, Walmart can now deliver ads directly to millions of smart TVs, creating new and valuable touchpoints for advertisers. This acquisition will not only give Walmart more advertising inventory but also strengthen its ability to offer a closed-loop attribution model, where ads can be linked directly to consumer purchases, thereby providing a compelling value proposition for advertisers.

A critical advantage of this deal is Walmart’s access to Vizio’s valuable first-party data, which becomes more crucial as privacy regulations tighten and third-party cookies phase out. Vizio’s Automatic Content Recognition (ACR) technology enables Walmart to gather granular data about what consumers are watching across devices, even if they’re not using Vizio’s apps directly. This level of insight into viewing habits allows Walmart to offer highly targeted ads, connecting consumers' media consumption with their shopping behaviors. Owning this data gives Walmart control that other advertisers reliant on platforms like Google or Apple cannot offer, shielding the company from future privacy clampdowns and enhancing its ability to provide deterministic attribution to brands.

Furthermore, the acquisition is part of Walmart’s broader strategy to expand Walmart Connect beyond its traditional digital and in-store ad inventory. Previously, Walmart’s advertising offerings were limited to display ads on its website, in-store promotions, and audio ads. With Vizio, Walmart enters the high-margin CTV ad space, allowing it to serve ads on the big screen in consumers' homes. This not only diversifies Walmart’s revenue but also provides a platform that advertisers covet for its high engagement and brand-building potential. Walmart can now offer premium cost-per-thousand (CPM) ad placements, significantly boosting its advertising business. By integrating Vizio’s ad business, which generated $156 million in Q3 2023, Walmart is poised to accelerate its growth in digital advertising while expanding its inventory to a highly sought-after medium.

Finally, the long-term value of the Vizio acquisition goes beyond immediate advertising gains. Walmart’s strength in data analytics, seen historically in how it leveraged retail data to improve in-store promotions and pricing strategies, can now be extended into the media space. With access to Vizio’s viewing data, Walmart can create synergies between what consumers watch and what they purchase. The company’s ability to connect media exposure to retail behavior will not only refine its advertising offerings but also improve product placements, store layouts, and promotional tactics based on insights from consumer viewing habits.

Deal Structure:

Walmart first announced its acquisition of VIZIO Holding Corp. on February 20th, 2024, in a $2.3 billion cash deal, with Walmart acquiring 100% of Vizio's outstanding shares at $11.50 per share. The acquisition was announced to be financed using a combination of cash and/or debt, but it is not subject to a financing condition, ensuring a stable funding process. Upon the completion of the deal, Vizio will be fully integrated into Walmart, and its Class A common stock will be delisted and no longer publicly traded. The advisors for this deal include Evercore as the exclusive financial advisor to Walmart and Hogan Lovells as legal counsel. On the sell side, Wilson Sonsini advises VIZIO.

Vizio’s Board of Directors has unanimously approved the transaction, and Vizio stockholders, including founder William Wang and his affiliates, who hold 89% of the voting power, have also approved the deal. This majority approval eliminates the need for further stockholder consent, making the transaction less prone to delays. The deal initially included a 45-day window during which Vizio could accept a “Superior Offer” under the terms of the merger agreement, meaning that had a better offer emerged for the seller, Vizio would’ve had the right to terminate the deal with Walmart. However, this window has since passed by and VIZIO did not accept a superior bid.

Walmart has indicated that due to transaction-related costs associated with the acquisition, including talent retention and technology integration, the deal is expected to be slightly dilutive to earnings per share (EPS) in the short term. Nevertheless, Walmart projects that the internal rate of return (IRR) for this deal will exceed its reported return on investment (ROI) over time, suggesting that the acquisition will be profitable in the long run.

Once the acquisition is completed and Vizio is fully integrated, its business operations will be consolidated into the Walmart U.S. segment. This move allows Walmart to manage Vizio’s smart TV, ad tech, and data businesses under a unified corporate structure, streamlining operations and maximizing synergies with Walmart Connect, Walmart’s advertising arm.
However, as of August 2024, this deal has yet to be completed and was subject to a full FTC (Federal Trade Commission) antitrust probe on April 30th.

Deal Discussion:

Walmart’s billion acquisition of Vizio is a deal that, while rooted in the modern era of connected TV and digital advertising, directly reflects the principles and strategies laid down by Sam Walton when he founded Walmart. From its inception, Walmart’s growth has been guided by Walton’s relentless focus on low prices, efficiency, data-driven decision-making, and continuous innovation—all of which underpin the company’s current expansion into digital advertising through the Vizio acquisition. Sam Walton was a master of leveraging technology and logistics to achieve scale and efficiency, which revolutionized retail. His decision to implement one of the first private satellite systems in the retail industry back in the 1980s allowed Walmart to connect its stores in real time and optimize inventory management, resulting in significant cost savings. This deal is a natural evolution of Walmart’s mission to bring value to its customers, now redefined for a digital-first world where media consumption and shopping are deeply intertwined.

In Sam Walton’s early days, his focus was simple: offer customers the lowest prices and do so by maintaining efficiency in operations. This principle not only defined Walmart’s approach to physical retail but also permeated into the company’s supply chain management, inventory practices, and pricing strategies. Today, that same ethos drives Walmart’s expansion into the digital space. By acquiring Vizio, Walmart is securing its ability to compete at scale in one of the fastest-growing segments of digital media: connected TV advertising. Walmart’s ownership of Vizio allows it to harness the data generated from millions of SmartCast users and leverage that data to deliver highly targeted advertising to consumers while keeping costs low for advertisers. This approach mirrors Walton’s original belief that maintaining a competitive edge requires controlling both the customer experience and operational efficiency—just as Walmart did with its pioneering distribution systems in its early years.

Source: A-Z Quotes

Another key principle Sam Walton championed was the idea of learning from competitors and using those insights to drive Walmart forward. He frequently visited competing stores to see what they were doing right and adapted those strategies to Walmart’s advantage. In much the same way, Walmart’s move to acquire Vizio reflects the company’s recognition of the growing success of Amazon in integrating retail and media. Amazon’s dominance in the retail media market, particularly through its Fire TV platform and Prime Video, provided a blueprint for how Walmart could grow its own advertising business. By learning from Amazon’s success and acquiring Vizio’s well-established SmartCast platform, Walmart is positioning itself to compete more effectively in a space where Amazon holds a significant lead. This competitive mindset, which Walton instilled in Walmart’s culture, is key to understanding why Walmart would pursue an acquisition like Vizio to strengthen its Walmart Connect ad business and take a stronger foothold in digital media.

Walton also recognized the power of scale early on—the idea that growth and expansion create opportunities for efficiencies that can be reinvested in lower prices for customers. Walmart’s expansion into connected TV follows a similar logic. By acquiring Vizio, Walmart not only grows its advertising inventory but also positions itself to integrate a high-margin business that can scale rapidly. Vizio’s SmartCast operating system offers Walmart a valuable platform for reaching millions of households, with the ability to serve ads directly on smart TVs through WatchFree+. Much like Walton’s original strategy of building more stores to create economies of scale, Walmart’s acquisition of Vizio provides a new touchpoint for engaging with consumers, one that offers higher margins and deeper insights into consumer behavior. As advertising becomes a key driver of profitability for Walmart, much like Walton’s early moves in logistics and supply chain management created new efficiencies in retail, this deal reinforces the importance of scale in driving long-term growth.

Moreover, Walton always believed in using data to drive business decisions—a strategy that played out in Walmart’s early days as it used point-of-sale data and advanced logistics to optimize inventory and lower costs. This focus on data remains central to Walmart’s business model today and is perhaps the most significant motivation behind the Vizio acquisition. Vizio’s Automatic Content Recognition technology, which tracks consumer viewing habits across devices, provides Walmart with a treasure trove of first-party data that will fuel its advertising business. This acquisition puts Walmart in a unique position to offer advertisers closed-loop attribution, where they can see the direct impact of their ads on Walmart shoppers, connecting media consumption to retail behavior. In the same way that Walmart revolutionized its supply chain by using data to streamline operations, it is now using Vizio’s data to revolutionize its advertising business, ensuring that it can deliver personalized, data-driven ads that enhance the customer experience while driving advertising revenue.

Lastly, Walton’s philosophy of adaptation and innovation continues to resonate in Walmart’s current strategy. He understood the importance of staying ahead of trends, whether it was self-service retail or expanding into suburban areas. Today, Walmart is adapting to the rise of digital media and the increasing demand for connected TV advertising by acquiring Vizio. This deal reflects Walmart’s ability to move with the times and stay relevant in an evolving market, ensuring that it remains a leader not just in retail but in digital media. As Walmart expands its presence in retail media, much like Walton expanded physical stores in underserved markets, the acquisition of Vizio allows the company to extend its influence into the homes of millions of consumers, integrating media and retail in a way that echoes Walton’s original vision of accessibility and convenience.

Bear or Bull?

Although it’s been several months now since the announcement of the deal, let’s still wrap today’s post up with the fourth edition of Daniel’s Bear or Bull.

Source: AdExchanger

Bull Case

Walmart’s acquisition of Vizio positions the company to tap into the rapidly expanding connected TV and digital advertising markets. Integrating Vizio’s SmartCast platform into Walmart Connect enables Walmart to offer advertisers premium placements on millions of smart TVs, significantly enhancing its advertising capabilities. The deal also aligns Walmart with key trends in data-driven advertising, providing access to first-party data that allows Walmart to deliver highly targeted ads to consumers. Furthermore, Walmart’s focus on omnichannel retailing—connecting physical stores with digital experiences—finds a natural extension through Vizio’s technology, reinforcing Walmart’s commitment to staying competitive in an increasingly digital world. By leveraging Vizio’s Automatic Content Recognition data, Walmart can link TV ad exposure to real-time purchase behavior, a powerful proposition for brands looking for closed-loop attribution. Long-term, this acquisition strengthens Walmart's ability to compete with Amazon in retail media while diversifying its revenue streams beyond traditional retail.

Bear Case

While the Vizio acquisition offers significant growth potential, the deal has attracted antitrust scrutiny from the Federal Trade Commission (FTC), which could delay its completion and increase regulatory hurdles. The FTC has launched a full antitrust inquiry into the deal, focusing on potential anti-competitive concerns given Walmart's growing dominance in both retail and advertising​. This in-depth review may extend the regulatory process and add uncertainty around the timeline of closing the deal— At the time of this blog’s writing, 7 months later in August 2024, the deal is yet to be completed. Additionally, Walmart’s heavy reliance on Vizio’s ad and data capabilities brings operational risks as it transitions into the more complex world of media and ad tech. Moreover, the near-term dilution to earnings per share (EPS) due to integration costs and talent retention could concern investors. With Amazon still holding a dominant position in retail media, Walmart’s ability to scale its advertising business quickly enough to justify the $2.3 billion investment remains a critical challenge, especially as privacy regulations around first-party data continue to evolve.

Final Verdict: Bull

This has been my longest blog yet, but writing this post has also been the most enjoyable process so far. Shoutout to everyone who actually got to the end; it really means a lot to me. I will end this blog by leaving you all with one of my favorite quotes from Made in America:

“Celebrate your success and find humor in your failures. Don't take yourself so seriously. Loosen up and everyone around you will loosen up. Have fun and always show enthusiasm. When all else fails, put on a costume and sing a silly song.” ~ Sam Walton