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Digitization at Walmart

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Can you think of any company or industry that hasn't been transformed – for better or for worse – by digitization? Let's see how Walmart has managed…

Introduction

It is hard to think of an industry or company that hasn’t been shaped by digitization and the Internet of Things (IoT) movement. In retail, the IoT offers opportunities in three critical areas: customer experience, the supply chain, and new channels and revenue streams [1].

Digital from its inception, Amazon has crushed many traditional retailers online. Wal-mart, determined to avoid this fate, has poured $ billions into its digital transformation effort, which has included over 3500 new hires and 15 acquisitions [1].

Walmart today is the second largest online retailer in the US behind Amazon [2], with online sales of $14bn last year, about one-sixth Amazon’s [3], but there are opportunities for further business/operating model transformations via digitization.

 

How Walmart is using digital technology to develop its business model and organizational model

Walmart is leveraging digital technology in diverse ways:

  • Establishing leadership in online retail:
    • Aggressive expansion of online offers to compete with e-commerce giants e-Bay and Amazon. com now sells 15 million different types of items, with an expansion rate of 1 million items per month [2].
    • Introduction of Prime-like membership program called “ShippingPass”, which offers a two-day rapid delivery service that is supported by several giant “Online Fulfilment Centre” warehouses around the country.
    • Expansion of the free curbside pick-up service for groceries purchased online. The pick-up service is available in 400 stores in 60 markets.
    • Adoption in 2012 of a top-of-the-range search engine – “Polaris” – which provides personalized recommendations to customers. In the year after it was launched, Polaris increased online sales conversions by 20% [3].
  • Using technology to enhance the in-store experience:
    • Relative to peers, Walmart has been more creative in maximizing app use for in-store customers leading to mobile devices generating 50 percent of Walmart. com traffic in the US [1]. The Walmart Pay app was recently expanded to reach all 4,600 US stores and features include:
      • Sensing when a customer enters a physical store and facilitating browsing of the store’s ads and offers, and helping with item locations
      • Allowing customers to create shopping lists, use digital coupons, and adding up the total cost of their shopping in real-time
      • Price-matching of purchased items
    • Like many retailers, Walmart has made extensive use of Big Data to personalize its interaction with customers, drawing insights from analyses data on purchasing behaviour, search histories and web interactions.
    • Walmart recently secured a patent for a self-driving shopping cart.The shopping carts could assist customers to navigate and find items on their shopping lists [4].
  • Improving store and stockroom efficiency
    • Walmart has increasingly relied upon RFID technology to improve inventory management and to track individual items more efficiently than can be done with bar codes [5]. RFID can be used to create “smart shelves” which automatically alert staff when items are low in stock. Research estimates that Walmart has been able to reduce its out-of-stock inventory by up to 16% by introducing technologies like RFID into its supply chain [1].
    • Walmart recently announced it was six to nine months away from using drones to track inventories in its warehouses, with jobs of quality-assurance employees on the line [4].
    • Walmart is currently building one of the biggest private clouds, which would host data from its 11,000 stores and is expected to make 40 petabyte of data available every day [1].
  • Developing organizational expertise in digital innovation
    • Formed in May 2011, @WalmartLabs is an idea hub aimed to generate innovative ideas for improving customers’ online and in-store shopping experience. Several of the digital transformation initiatives listed here were proposed and developed by the @WalmartLabs team.

 

Additional steps that Walmart should consider implementing

 

walmart

 

Source: Accenture (2015), ‘The Internet of Things: Revolutionizing the Retail Industry’

In the rapidly-developing field of digital transformation, Walmart cannot be complacent.  The diagram above includes some additional initiatives that Walmart could develop. Specific initiatives include:

  • Smart Mirrors: a number of fashion retailers such as Macy’s, Topshop and Nordstrom are experimenting with smart mirrors that enable customers to alter the dressing room lighting; virtually try on items; or see whole outfits that could complement a particular garment [6].
  • Robots are likely to play an increasing role in retailers’ manual operation of stores. Following the “smart carts” trial, Walmart should evaluate further ways to reduce costs through in-store robots.
  • Smart price tags: Some retailers are considering shelf-edge tags that can identify customers by their mobile phone, and can reduce prices for those with loyalty cards or certain logged past purchases [7]. They can also be used to alter prices based on demand e.g. instantly reducing prices at non-peak hours or when items are approaching their Best Before date
  • Smart packaging uses technology to help control and detect changes in the storage environment, and trace product history [8].

 

Word Count: 799

 

References:

[1] “Walmart: Where digital meets physical”; Capgemini Consulting, 2015. Available at https://www.capgemini-consulting.com/resource-file-access/resource/pdf/walmart_pov_15_7_2015.pdf

[2] “Here is how Walmart is reigniting its e-commerce growth”; Fortune Magazine, 2016. Available at http://fortune.com/2016/08/18/walmart-ecommerce-2/

[3] “Walmart revamps e-commerce technology as Amazon applies pressure”; The Wall Street Journal, 2016. Available at http://blogs.wsj.com/cio/2015/11/25/wal-mart-revamps-e-commerce-technology-as-amazon-applies-pressure/

[4] “Walmart’s self-driving shopping cart is a new frontier for the Internet of Things”; Business Insider, 2016. Available at http://www.businessinsider.com/walmarts-self-driving-shopping-cart-is-a-new-frontier-for-the-internet-of-things-2016-9

[5] “RFID Technology Boosts Walmart’s Supply Chain Management”; University of San Francisco, 2016. Available at http://www.usanfranonline.com/resources/supply-chain-management/rfid-technology-boosts-walmarts-supply-chain-management/#.WC9p8Y-cE2x

[6] http://www.sachsinsights.com/the-power-of-the-small-innovation-macys-dressing-room; http://tech.co/smart-fitting-room-future-retail-2015-12 ; http://www.cbsnews.com/news/how-smart-mirrors-are-boosting-clothing-sales/

[7] “DIY Chain Tests Variable Pricing”; RetailWire, 2013. Available at http://www.retailwire.com/discussion/diy-chain-tests-variable-pricing/

[8] Park, Y.W., Kim, S.M., Lee, J.Y. et al. Application of biosensors in smart packaging. Molecular & Cellular Toxicology. (2015) 11: 277. http://link.springer.com/article/10.1007/s13273-015-0027-1 ; http://www.forbes.com/sites/moorinsights/2015/10/01/what-does-food-packaging-have-to-do-with-big-data-and-the-internet-of-things/#770c91d378a4

 

4 thoughts on “Digitization at Walmart

  1. It appears that Walmart has been investing heavily in both growing its online presence as well as upgrading its actual storefronts. At the end of the post, you reference future ideas for potential implementation at the retail store level – how do you think a company like Walmart (or any other retailer) balance their capex dollars for improving their online presence and supporting logistics as opposed to investing in products that improve the physical store locations?

  2. Continuing on the thought from the previous comment, with Walmart as a low-cost operator appealing to a range of consumers, is there a compelling argument for Walmart to invest so heavily to look like Amazon? From a logistics standpoint this is a logical move to streamline and use existing autonomous machines to do easy and repetitive labor tasks, but from a consumer lifetime value (CLV) point of view, would they not be commoditizing their brand of every day low price (EDLP) and the brand of Walmart in favor of just another online retailer? Amazon can target middle to higher-end consumers with the requirement for a credit card and stable shipping address, but Walmart provides an in-store opportunity for the more liquidity constrained consumers that can’t be lost. Amazon is disrupting Walmart’s incredible status in the way that Walmart disrupted other consumers [1], but should all of those technological advances be applicable to Walmart, or should they differentiate in another way and stick with their core consumer?

    [1] Laura Heller, “The Battle Between Walmart and Amazon Will be Epic”, Forbes, October 30, 2016, http://www.forbes.com/sites/lauraheller/2016/10/30/the-battle-between-walmart-and-amazon-will-be-epic/#1a526e9b5da3, accessed November 20, 2016.

  3. You mention the Walmart app’s recent expansion and its new functionality including helping with item locations in store, allowing customers to create shopping lists and use digital coupons and facilitating the browsing of the store’s ads and offers. In many respects these are valuable additions for the customer but Walmart must be careful not to use this data in ways that appear ‘creepy’ or intrusive to customers. As the amount of data companies hold on us increases, data integrity and privacy will become more and more important. I would challenge Walmart to use its data in the smartest and most selective way possible without risking alienating customers who may find its more technologically ‘advanced’ practices off putting.

  4. Thanks for the interesting post on Wal-Mart. I was surprised to see just how extensive the company’s online presence currently is. Relative to Amazon, which I’d argue is more heavily merchandised towards non-perishable goods, I wonder if Wal-Mart will ever be able to compete on the same scale as its larger competitor in online retailing. That said, your point regarding curb-side pickup certainly rings true–this seems like a natural opportunity, particularly given the typical Wal-Mart customer likely goes to the store with the intent of using at least some of the items purchased that same day (e.g. food). Playing this forward, should curb-side pickup becomes a more meaningful portion of total sales, it would be interesting to consider the impact that this would have on the layout of Wal-Mart stores (add a drive thru?) and if customers’ baskets would decrease in size due to fewer in-store, impromptu purchases.

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