5. 5 Leading the Next Generation of Retail by Converging Digital and Physical In a 2013 announcement, Bill Simon, Walmart US President and CEO, clearly laid out Walmarts commitment to play a lead role in the next generation of retail. He said: We believe our multi-format portfolio will fuel the next generation of retail, enable the convergence of digital and physical store locations through e-commerce and unlock value, giving our customers anytime, anywhere access to Walmart.17 Essentially, the aim of this integration of physical and digital is to combine Walmarts traditional strengths in stores and distribution networks with its online and mobile experience. The end result for customers will be a faster, easier shopping experience with the promise of further savings. To realize this vision, Walmart has embarked on a number of initiatives (see Figure 4). Reaching Customers Faster with Online Fulfillment Centers Walmart has been heavily investing in building Online Fulfillment Centers (OFCs) or warehouses dedicated to serve online orders. These fulfillment centers will play a key role in Walmarts plans to scale up online sales close to threefold, reaching $35 billion by 201818 . Until late in 2013, Walmart had only one distribution center dedicated to serving Internet orders. However, it opened a new, 800,000 square feet OFC in Texas in October 2013 and announced a new, one million square feet facility19 . Walmart also recently announced plans to open four such facilities, each more than one million square feet in area20 . OFCs differ from traditional storehouses by making it easier and faster to assemble individual online orders through the use of robots and computer-controlled chutes. Faster assembly and shipment cut down the overall time required to fulfill orders, enabling Walmart to offer flexible shipping options to customers. For example, same-day delivery, expedited delivery and site-to-store (free shipping on online orders that customers can pick up from a Walmart store). In 2013, an algorithm developed by WalmartLabs helped Walmart speed up delivery by 15% and reduce delivery costs by 10% in two years21 . Fulfilling the Core Brand Promise with Intuitive Mobile Apps Today, more than 50 percent of Walmart. com traffic in the US comes from mobile devices22 . Realizing the potential of mobile for Walmarts business, Neil Ashe, President and CEO of Walmart Global eCommerce, said: In the UK, one-third of online sales for Asda are coming from smart phones. And customers who shop the combination of Walmarts stores, website and mobile apps happen to be great customers. In fact, they spend twice as much inside our stores as customers who arent using our website and apps.23 Over the years, mobile has become a key channel reinforcing Walmarts core promise of Save Money. Live Better. Figure 4: Initiatives Aimed at Realizing Walmarts Vision of the Next Generation of Retail Source: Capgemini Consulting Analysis Walmart Digital Initiatives Employing Social Insights to Understand and Serve Customers Better Reaching Customers Faster with Online Fulllment Centers Taking Mobile Assistance to the Next Level with Intuitive Apps Forecasting Demand to Better Plan Inventory Online Fulfillment Centers will play a key role in Walmarts plans to scale up online sales close to threefold, reaching $35 billion by 2018.
6. 6 Figure 5: Snapshots of Some of Walmart Mobile Apps Key Features Source: App Stores on iTunes and Google Play Store Today, more than 50 percent of Walmart.com traffic in the US comes from mobile devices. Over the years, mobile has become a key channel reinforcing Walmarts core promise of Save Money. Live Better. In 2012, Walmart added geo-fencing to its app, a feature that senses when a customer enters a Walmart store and allows him/her to browse the stores local ads, offers and item locations24 . The app allows customers to scan product bar codes and QR codes to access product information,ratings,reviewsandadditional content. Walmart further updated the app in 2014 to help customers pinpoint the exact aisle location of a product in its stores25 . The app also allows customers to create shopping lists by speaking into their phones, use digital coupons and even tally the total price of their cart in real-time as they add items. To further strengthen its core promise of offering competitive prices, Walmart launched another app feature called Savings Catcher. It matches prices from other stores and upon finding a difference, issues a gift coupon worth the difference (see Figure 5)26 . Walmart estimates that nearly 50% of Walmart smartphone users in Q1 2014 used the device to assist with their shopping decision27 . Combining Social Media and Big Data Analytics to Offer a Personalized Shopping Experience Walmart CEO Douglas Mcmillons expressed the importance of data when he said: Walmart now has about 30 petabyte of shopping information. For years, our data has helped us run our stores around the world. Now, it is helping us personalize the shopping experience in ways that let us serve customers even better.28 Utilizing the treasure trove of data that it has gathered, Walmart is able to suggest more relevant bundle values, coupons, customized product recommendations, simplified payments, and information on nearest stores29 . Walmart does this by analyzing individual purchasing behavior, search histories and other web interactions as well as social media footprints. An example of Walmarts use of Big Data and social media is Shopycat, a Facebook app developed by @WalmartLabs that helps customers discover suitable gifts for their friends and family30 . The app analyzes behavior on social media to build a picture of the hobbies and interests of the friends of customers and arrives at gift recommendations for them. Another example of Walmarts intelligent use of data is its Polaris search engine, which powers its website and mobile apps. Polaris uses semantic search technology31 that understands the contextual meaning of shoppers search and generates more meaningful results32 . For instance, when a customer who regularly searches for movies tweets that they love Salt, the search engine recognizes that the customer is referring to the Hollywood movie Salt and not table salt33 . The use of Polaris helped Walmart improve conversion of online visitors to customers by 10% - 15%.
7. 7 Walmarts Polaris Search Engine uses semantic search technology that understands the contextual meaning of shoppers search and generates more meaningful results. Tapping the Power of Analytics to Optimize Inventory Management Walmart is employing analytics not just to enhance the customer experience but also to make better decisions in managing swathesofinventory.TeamsatWalmartLabs use visualization techniques to analyze social activity to capture insights that may indicate changes in product demand. Walmart can then use these insights to stock extra inventory at locations where it expects higher demand and reduce it from locations with lower demand. Arun Prasath, Principal Engineer at WalmartLabs, outlines the use case: Social buzz typically precedes retail buzz. Our goal is to tap into this social buzz and help Walmart with decision-making on aspects like inventory and assortment. As an example, a reasonable spike in social activity about Sonys new Android phone Xperia Z, few days ahead of its actual launch, can help our merchants make smarter decisions ahead of time (see Figure 6)34 . Source: WalmartLabs Blog Figure 6: Using Social Media Analytics to Forecast Product Demand Walmart has been able to predict demand patterns for some uncommon products, such as cake- pop makers and electric juicers, by uncovering their associations with other products that have a bearing on their demand. 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 chain35 . Walmart has even been able to predict demand patterns for some uncommon products, such as cake-pop makers and electric juicers, by uncovering their associations with other products that have a bearing on their demand36 .
8. 8 How Does Walmart Stay Ahead in Digital Innovation? Walmarts digital transformation offers salutary lessons and insights for other major enterprises looking to innovate in a digital economy. Walmart has driven growth and increased performance through sustained digital innovation owing to its digital-savvy leadership, strategic acquisitions, its ability to attract digital talent, and a culture of innovation. Digital-Savvy Leadership A digital transformation, like any significant enterprise-wide change, requires committed and strong top-down leadership. In the past few years, Walmart has been working on building a team of senior leaders with established credentials in leading digital enterprises. Current President and CEO of Global eCommerce division at Walmart, Neil Ashe, is former President of CBS Interactive. Fernando Madeira, current President and CEO of Walmart.com, is former CEO of Terra, the largest internet portal in Latin America. Similarly, Walmarts board includes Marissa Mayer, President and CEO of Yahoo! Inc and Kevin Systrom, CEO and co-founder of Instagram. All of them and other leaders have played a key role in shaping Walmarts digital strategy. Strategic Acquisitions to Bolster Digital Capabilities Since 2011, Walmart has acquired and integrated a number of startups to boost its digital capabilities (see Figure 7)37 . One of these acquisitions was Kosmix which was instrumental in shaping WalmartLabs in its early days. WalmartLabs has been particularly focused on acquiring startups that have pioneered use of mobile, data analytics, search, advertising, social shopping and social media. Walmart has absorbed most of the talent it gained from these acquisitions into WalmartLabs. The constant infusion of fresh talent has helped Walmartconsistentlyupgradekeyfeatures of its digital properties. For instance, Walmart aimed to rope in the talent from Adchemy for product classification and search engine optimization38 ; while the team acquired from Stylr was expected to be tasked with developing enhancements to in-store experience.39 Walmart firmly believes these capabilities hold the key to unlocking more value for existing customers, as well as tapping newer customer segments as consumer preferences evolve. Adopting Non-Traditional Approaches to Building Digital Skills Acquiring startups has not been the only strategy for building digital skills at Walmart. Walmart is using a number of non-traditional approaches to bridge the digital skills gap that is plaguing many large organizations. Walmart is in the process of building one of the largest private clouds to hold data from its 11,000 stores which, once complete, is expected to make 40 petabyte of data available every day40 . To execute projects like these, Walmart is on constant look out for data professionals. One of the programs it undertook to attract analytics talent was conducting an analytics competition on Kaggle, an online platform that helps companies crowdsource solutions to analytical problems. The exercise helped Walmart create a buzz around their analytics team as well as hire some strong talent. Walmart also recently ran a recruitment campaign on social media with the hashtag #lovedata to position itself as an employer of choice among the online data science community. In the past few years, Walmart has been working on building a team of senior leaders with established credentials in leading digital enterprises. WalmartLabs has been particularly focused on acquiring startups that have pioneered the use of mobile, data analytics, search, advertising, social shopping and social media. To attract strong analytics talent, Walmart conducted an analytics competition on Kaggle, an online platform that helps companies crowdsource solutions to analytical problems.
2010 IBM Corporation IBM Sensor Solutions When Physical meets Digital.