Mike Isaac

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Taking Cues From the Valley, Walmart Brings the Shotgun Approach to E-Commerce

WalmartHQ

Imagine walking into one of Walmart’s stores today. You’ll see the familiar aisles, the usual customer service floor reps, the check-out stands. You’ll shop as you always have.

The Walmart of tomorrow, however, wants to be nothing like the Walmart you know today.

The multinational retail giant is in the midst of reshaping its entire e-commerce strategy, aiming to reclaim a waning customer base which in recent years has moved toward online shopping. Despite the company’s most intense efforts only coming to fruition over the past 18 months, Walmart hopes to use its massive brick-and-mortar footprint to leverage its wide range of digital initiatives.

walmart_scan&go_splashThat isn’t a farfetched notion; roughly two-thirds of the U.S. population live within five miles of a Walmart. “No one else has 4,000 points of distribution within a stone’s throw of every customer in America,” said Neil Ashe, President and CEO of Walmart Global eCommerce, at an event with reporters on Tuesday.

But, as the rise of e-commerce obviously shows, having a broad physical presence isn’t enough anymore. Companies like Amazon and eBay have captured large segments of retail market share that industry leaders like Walmart once securely held, while Walmart sees slower growth in its traditional outlets; same-store U.S. sales for the last 16 weeks ending in April are expected to be relatively flat compared to the year-ago quarter, Walmart U.S. CEO Bill Simon said on the company’s last earnings call in February.

Walmart Global eCommerce is the company’s answer to this, a 1,500-person wing of the retail giant headquartered in San Bruno, Calif. — right up the road from Silicon Valley (and across the street from Google’s YouTube offices).

Some of Walmart’s most interesting digital experiments in recent years have sprung from this location, due to what the company claims is a Valley-type atmosphere of product development and execution, allowing multiple small teams to plan and execute product ideas at a much faster pace than usual. The company hosts occasional “hack days” like other startups, dedicating days to working on whatever engineers want, and then putting those ideas into practice. Sri Subranamiam, VP of search and catalog, said the company runs A/B tests constantly, and introduces new features on a weekly basis.

“There’s a reason we call ourselves the world’s biggest startup,” said Jeremy King, Walmart eCommerce CTO. “We like to act like that.”

And you’ll probably notice that many of these experiments are mobile-focused. (Perhaps a good idea, considering that more than half of Walmart’s U.S. customer base owns smartphones.) Scan and Go, a feature that Walmart is slowly rolling out to more than 200 stores in an expanded testing phase, lets a customer scan the bar codes of the different items they choose while moving through the store aisles using their smartphone. As the customer approaches checkout, they need only show a bar code to a kiosk’s screen, which automatically loads all the item data into the machine and prompts you with the total you need to pay.

The company also plans to update its mobile app in the near future, with greater emphasis on creating shopping lists before arriving to the store, finding coupons within the app to apply at the point of sale, and continuing to track your monthly purchasing budget via e-receipts and account management using Walmart’s Web portal.

It’s a digital approach to a kind of vertical integration; if Walmart can own the entire shopping experience from purchase planning to comparison tracking to point-of-sale and ultimately to managing a customer’s budget and lead to revisiting the store, the company could do better to protect itself from losing customers to the Targets, eBays or Amazons of the world at some point through the purchasing process.

walmart iPad_shelf_plus_detailBut Walmart isn’t putting all of its digital eggs into one basket. It’s hedging strongly by trying out myriad programs simultaneously, expanding the ones that seem to have traction, and killing the ones that don’t. On Tuesday, for example, SVP of Walmart Innovations Jeff McAllister announced that the company would soon begin testing an in-store product-locker pickup service, similar to the likes of programs being tested by Amazon, UPS and the Google-acquired BufferBox.

Another big potential area for revamping: Social. Right now, there’s little direct integration with Facebook and Twitter outside of “Liking” the Walmart Facebook pages or tweeting about products. But if the company were to allow users to sign in to a custom Walmart profile using their Facebook or Twitter account, it could lead to better item suggestions and data on what sorts of products shoppers are interested in buying. Walmart hasn’t said this is happening, but it hinted strongly at something like it.

“The future for us is personalization,” said Ben Galbraith, VP of global products. “Right now, there are ways to personalize for customers who aren’t signed in, but we’ll introduce more and more perzonalization over time.”

Of course, while Walmart talks a big game, the proof is ultimately in the pudding — or rather, the balance sheet. The company has had the better part of two years to work on its digital initiatives, but early attempts saw some executive turnover, and struggles with how far away from the company’s Bentonville headquarters the Silicon Valley office should be. It has a history of making large e-commerce pronouncements without delivering entirely solid returns.

“They’re saying all the right things, but the challenge is the numbers,” said Sucharita Mulpuru, a retail analyst at Forrester Research. “They really haven’t fully converted to being as strong in digital to compete with players like Amazon yet.”

Still, the company maintains that its digital strategy is in its early days, and any number of the many, many startup-like initiatives could expand and grow into a larger part of the business.

“There’s a method to the madness,” said Gibu Thomas, SVP of mobile and digital.

For Walmart’s sake, let’s hope so.


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— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik