The age of Amazon
Walmart is in a dire situation. By all estimates, Amazon’s retail sales are soon going to catch-up or at least rival it’s. The answer here is growing its own online revenue and Walmart management agrees. At a recent investor meeting, executives announced a focus on e-commerce to drive growth .
However, customer demands have changed. A quote by Stephenie Landry, head of Amazon’s Prime Now program comes to mind: “Ten years ago, people thought two-day shipping seemed really fast; now we think two-hour shipping and one-hour shipping will be the standard” . Also, apps like Uber and Instacart have changed customer expectations in terms of delivery.
Furthermore, online demand is spiky and requires infrastructure built for peak conditions . Traditional retail infrastructure isn’t built to handle these spikes, but rather does well with stable, consistent, demand [Ibid]. The key to the castle here is faster, responsive delivery through digitization of the supply chain – a feat Amazon achieved years ago.
Acquisitions, talent and fulfillment centers
Walmart’s management has taken a single minded approach for the short-term: building a deeper online portfolio through acquisition to increase ecommerce revenue. In the last year, Walmart has acquired brands like Bonobos, Shoebuy and Jet.com to pad its online revenue and setup opportunities for future growth .
For the mid-term, Walmart is focused on solving deeper problems using a two-pronged strategy: bringing on relevant talent in the digital space and building new distribution centers.
For instance, Marc Lore, a tech executive, is well-known in tech circles for his e-commerce expertise and selling Quidsy (an e-commerce site for diapers) to Amazon in 2011 for $545M . He has been brought under the fold of Walmart and named CEO of eCommerce to spearhead the new digital strategy [Ibid].
Walmart is also investing in distribution centers so as to deliver goods to consumers across the country faster . These new facilities are “more than 1 million square feet and hold at least 500,000 items—much larger than its traditional distribution centers for stores, which hold 30,000 to 50,000 items” [Ibid] to offer a wider selection to consumers [Ibid]. “These new buildings…use both human labor and automation, such as computer-controlled chutes, to move items [Ibid]. The new centers will be part of a network for filling online orders that includes traditional buildings, plus 11 existing smaller e-commerce centers and 83 Wal-Mart Supercenters that have been designated ‘ship-from-store’ locations. [Ibid].”
The goal of these distribution centers is to serve a wider selection across the country quicker [Ibid], thus eventually competing with Amazon’s delivery times. Lastly, Walmart’s goal also involves some experimentation in newer ways of delivery that might be faster in the future i.e. drones. For instance, “a patent application filed by Walmart…proposes an ‘aerial transport and launch system’ for dispatching delivery drones in mid-air.” 
Going the extra mile
The goal for Walmart however shouldn’t be band-aids but rather to build an organization that can compete in the short-term by further investing in advanced technology in fulfillment centers and mid-term by creating a culture that rivals Amazon’s culture of experimentation.
Walmart needs to invest in core technology such as artificial intelligence and robotics, not just better information systems. After Amazon acquired Kiva Robotics (a startup to replace warehouse workers with robots) in 2012, it immediately stopped other retailers from using Kiva’s products and built robotics-driven logistics systems internally . Today, there are better products than Kiva that Walmart can deploy internally to optimize warehouses i.e. Locus Robotics’s fleet of robots to ferry goods across the warehouse or Fetch Robotics’s pick and pack systems to replace human workers [Ibid]. Walmart needs to be able to deploy these types of technologies consistently to build efficient fulfillment centers.
Furthermore, Walmart has been a successful high-volume discount retailer by creating a culture of operational efficiency. However, it noticeably lacks a culture of innovation by experimentation through failure.
A quote by Jeff Bezos comes to mind: “I’ve made billions of dollars of failures at Amazon.com,” he said. “Literally billions. … Companies that don’t embrace failure and continue to experiment eventually get in the desperate position where the only thing they can do is make a Hail Mary bet at the end of their corporate existence.” 
These experiments allow Amazon to continue innovating for customers with programs like Prime Now. To answer, Walmart needs to create a culture that does the same.
Open questions that still persist:
- In the rural market — will faster delivery ever matter? Due to Walmart’s strength in small towns, will Amazon lose?
- Projections above show Amazon is poised to win online. Is Walmart’s ecommerce push a Hail Mary?
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