Walmart has confirmed that it’s teaming up with Microsoft in a bid for TikTok US operations which would give them ‘riches of data’ to take on their biggest mutual rival Amazon.
The 58-year-old American company Walmart is known for big box stores that sell everyday goods, casual clothing, groceries and TVs, while, Microsoft provides cloud computing services that help run the retailer’s stores and online shopping.
TikTok, however, is a Chinese-owned app that in just a few years has captivated hundreds of millions of teens with its entertaining dance videos, lip-syncing performances and comedy routines.
Although TikTok’s Beijing-based parent company, ByteDance, is nearing an agreement to sell its U.S., Canadian, Australian and New Zealand operations in a deal that’s likely to be in the $20 billion to $30 billion range, sources say. It has not yet chosen a buyer, but could announce the deal in the coming days, the sources say.
However, the combination of this two forces might be a game-changer. This partnership is a strong business strategy enabling them to join forces against Amazon, which competes with Walmart in e-commerce and Microsoft in cloud computing.
As time faded for TikTok to close a deal to sell its U.S. operations, Walmart confirmed on Thursday morning that it would work with its longtime technology partner Microsoft on a bid.
He also confirmed his interest in buying the TikTok service in the United States, Canada, Australia and New Zealand. At the time, Microsoft acknowledged its chief executive, Satya Nadella, had talked with Trump and that the company had committed to addressing the president’s concerns about the social media platform.
Walmart added that it believes a deal with Microsoft “would meet both the expectations of US TikTok users while satisfying the concerns of US government regulators.”
Therefore, the way TikTok has integrated e-commerce and advertising capabilities in other markets is a clear benefit to creators and users in those markets, the company said in a statement. “We believe a potential relationship with TikTok US in partnership with Microsoft could add this key functionality and provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses.
Analysts say the deal could give Walmart an inroad to a coveted demographic that it has long struggled to attract younger shoppers. While some said, “A social platform like TikTok would give Walmart easy access to the very audience it wants and needs to attract,” Neil Saunders, managing director of GlobalData Retail, wrote in a note to clients. “Over time, the platform could also become a significant channel through which Walmart could directly generate sales.”
By implication, what this means is that, by joining forces, Microsoft and Walmart’s bid will be more compelling and more likely to receive Trump’s approval, after he earlier said he would support enterprise tech firm Oracle buying TikTok. Oracle founder Larry Ellison is a vocal Trump supporter, and CEO Safra Catz has donated to the President’s reelection campaign.
“I think it’s helpful in the sense that there’s strength in numbers, a combined bid of two very powerful, very American companies definitely helps, [Walmart is] seen as a great American company by the current administration and probably more widely as well. That certainly acts in their favor.” Global Data Retail managing director Neil Saunders said of the Microsoft-Walmart bid.
The Trump administration is unlikely to oppose a Microsoft-Walmart bid because of both companies’ quiet efforts to build bridges with the current administration, said Schiffer.
The deal, if approved, would give Walmart and Microsoft access to hundreds of millions of consumers who could buy their products or become a lucrative audience for ads. In a filing this week, TikTok said it has nearly 100 million monthly active U.S. users.
Since other social apps like Facebook (FB), Get Report and Instagram, or Chinese TikTok clone Douyin, have already developed e-commerce tools in their respective apps, Microsoft nor Walmart are not ready to be left out of what could potentially be a transformative trend in eCommerce.
An RBC survey earlier this year found an acceleration in social commerce this year, with a 23% increase in Instagram users who reported making a purchase versus 15% in 2019. Both Facebook and Instagram have ramped up their commerce options this year, noted RBC’s Mark Mahaney.
Interestingly with Walmart’s confirmation, it is now apparent that his desire to join several others to acquire the tech company, including Oracle cannot be hidden anymore.
Simply put, he is pursuing the acquisition at a time when it’s trying to better compete with Amazon. It plans to launch a membership program, called Walmart+, soon. The subscription-based service is the retailer’s answer to Amazon Prime, which includes original TV shows and movies.
In a statement, the big-box retailer said TikTok’s integration of e-commerce and advertising “is a clear benefit to creators and users in those markets.” It did not say how it would use TikTok or whether it would be part of Walmart+.
“We believe a potential relationship with TikTok US in partnership with Microsoft could add this key functionality and provide Walmart with an important way for us to reach and serve omnichannel customers as well as grow our third-party marketplace and advertising businesses,” it said. “We are confident that a Walmart and Microsoft partnership would meet both the expectations of US TikTok users while satisfying the concerns of US government regulators.”
On the other hand, the emergence of the two bids follows the resignation late on Wednesday of TikTok’s chief executive, Kevin Mayer. Mr. Mayer, a former Disney executive who had announced he was joining TikTok in May, said he was resigning because he had signed on for a global role, not to run a carved-up version of the company. In a note to employees, he also indicated that a deal for TikTok might be close.
Amazon and Walmart on Battlefield
Currently, Walmart and Amazon seem to be matching each other with new ideas and innovation step for step. Amazon launched its Amazon Go convenience stores, which now total 17 locations where customers can simply pick up items and walk out without a cashier. Sam’s Club, owned by Walmart, has mirrored Amazon Go with its own version of the technology. Each company has also placed a large emphasis where it lags behind the other; for Amazon, that means investing in physical retail and grocery, and for Walmart, that means building out its e-commerce capabilities.
Walmart recently announced it will add 1,500 robots to hundreds of stores around the country, and it has already automated much of its supply chain and online order pickup processes. It is testing pickup-only locations as well as kiosks where customers can pick up orders quickly without interacting with a human.
Amazon is also leveraging robots at its large fulfillment centers and even recently started using autonomous robots to deliver packages in select markets. Amazon expanded its fashion to include try-before-you-buy clothes through Prime Wardrobe. It also has been digging into the smart home space and even offers in-home consultations for some customers. On the B2B side, Amazon Web Services has expanded its cloud offerings to connect with more clients. It’s Amazon’s fastest-growing and most lucrative business arm.
We can go on and on and see how Amazon is advancing than her counterparts. Hence, the reason for the collaboration between Microsoft and Walmart.