Wal-Mart Stores Inc, the world’s biggest retailer, generated nearly $420 billion in sales last year. However, as its customers increasingly also shop at online stores such as Amazon.com Inc., the US-based firm cannot regard the Internet as a future threat any longer. Wal-Mart gets just 1-2% of its sales from the Internet, while Amazon is expected to rake in over $55 billion in revenue this year, according to US analysts. In an interview, Jeremy King, Wal-Mart’s chief technology officer of global e-commerce, talks about the threat from Amazon, Wal-Mart’s push into online retail and the company’s ambition to be the world’s largest startup. Edited excerpts:
What are your ambitions in online retail?
When I came to Wal-Mart, the key question was really: ‘How can I leverage all of Wal-Mart’s assets?’ I quickly realized that the way to win the online space was to leverage everything. We have more than 4,000 stores in the US. When you think of those from an e-commerce perspective, why wouldn’t I think of those as 4,000 distribution centres? We have by far the largest distribution network in the US. So now it’s about bringing all our technology capabilities— our store technology partners, the online space – and working as a seamless unit. And that’s the goal of the global platform that we’re building.
The battle between Amazon and Wal-Mart is fascinating. What does this battle mean for the future of retail and e-commerce?
The thing that attracted me to Wal-Mart was that it’s the world’s biggest consumer company. All that has changed is that shopping behaviour is transitioning, where earlier consumers would come to our stores every week to get their groceries and merchandise. Now they are ordering online and picking it up at the store 50% of the time. Embracing our customers in the way they want to shop is our goal. Wal-Mart is the only company that is positioned well here. When you look at our reach, our distribution capability and the technology team that we’ve put together, we are going to do great things in the online space.
A lot of your consumers are now also shopping at Amazon. Is it going to be a catch-up game with Amazon and what all are you doing to make up the ground?
I’m building a global platform and global capabilities. We have some terrific platforms around the world that we have great leadership positions in. In the US, 200 million people come to our stores every week. And so from a consumer brand company we don’t have a brand problem. We have very loyal customers that are also shopping online and picking things up at the store.
Amazon is far ahead of you online. What gives you the confidence that you can change things?
There are a few things. There’s a new commitment to online. If you listen to our boss, Mike Duke, talk about his strategic priorities, e-commerce is always in the top three. And this was not the case three or five years ago. And when Wal-Mart puts their mind into something, it happens. You’ve seen that in the last 25 years, in the last 50 years. It’s a great time to be here at Wal-Mart.
We are building a great new technology team. We’ve got a lot of veterans on our team who know the business, who have been with the company for a really long time and can help us build this out. A lot of this is distribution network, access to customers and Wal-Mart is the world’s best in these things. We have to apply that to the online channel in a slightly different way but I’m confident that we have not only the people, but also the technology to run it.
You have been trying to introduce new technology on three fronts: mobile, online and in stores. What’s been the progress?
We have a talented mobile team that has launched mobile capabilities on the ipad, iphone and Android. These capabilities are not only giving relevant results when you’re shopping but also a consumer experience that allows you to do things like mobile self-checkout, where you’re coming in to the store and creating a list of items you want to buy. Many of our customers are using mobile devices to plan and budget (their shopping). In the US, we’ve recently launched our mobile app. When you get to the store, we have this geo-fence around the store. It detects that you’re in the store and switches the device capabilities to being more of a personal shopping assistant inside the store. Many of the Wal-Mart stores are big and finding items becomes complex.
After you’ve arrived, what has really changed in Wal-Mart’s handling of its e-commerce business?
To give you a couple of stats – 50% of the orders are done online and then picked up at the store. So customers buy online and come to the store and pick up. The second big one was we launched a product called pay with cash. It was really surprising, within the first couple of months it accounted for about 2% of our online transactions. What that showed was that not all consumers are comfortable with putting their information online. That opened up a category of consumers that were blocked from shopping online previously. We’ve also done a lot of work in social media and social analytics. We’re one of the only companies that suck in the total Twitter hose and we’re using that not only to drive our search engine but also to create new features and capabilities and social stores.
When you look at the struggles of the electronics retailer Best Buy, how does that make you feel about Wal-Mart’s future?
I don’t think Wal-Mart is really concerned about showrooming (where shoppers check out products in a store only to then purchase them online at a cheaper rate). Our motto is, Everyday low pricing. We are able to take our savings in things like online shopping and distribution and purchasing advantage and pour that directly back into the consumer price. We are building capabilities that would extend the showrooming concept. For example, if you go to our bike aisle, and you see a great bike for your kid and they want it in blue instead of red, we have this endless aisle capability, where you can scan a larger variety of items online and buy it there and come to the store and pick it up.
What does @WalmartLabs exactly do?
The idea was to be faster. Not only in building new technology but also to develop the technology in a new way. Wal-Mart previously had decentralized all its technology plays by country or by platform. The idea (with @WalmartLabs) was to bring this in-house, build small dedicated teams using the latest technology, open-sourced capabilities, teams that can file patents and contribute to open-source and do research projects. Build things like our new search engine that we launched recently. It was built with only 20 people, and that’s the first brick-and-mortar retailer in the world able to develop their own search engine. In just 10 months.
Why not go with a Google or something like that?
A thing like (online) search is core to our business. We can’t rely on a partner for that. When we decided to embark on this we decided we wanted to be the world’s biggest.
You acquired Kosmix (a search engine focused on social media) recently. Are you still looking to make such tuck-in acquisitions? Would India be a place where you might look at acquisitions?
Yes, we are interested. Since Kosmix, we’ve acquired four other small companies, mostly in the US. There was one in Australia. So, we’re looking for talent around the globe. The fact that we’re building teams that are autonomous, that can build their own capabilities without being tied back to the US, has been a real draw and we’ve been able to attract incredibly strong talent, not only from companies in Bangalore but even from top business schools.
Has it been tough to retain talent?
So far, no. The Kosmix team was fairly small and now it’s big. It was a great kick off to build @WalmartLabs and an idea and foundation of a different way of doing business where you’re really practising like the world’s biggest start up. That’s really our intention. We needed a kick-out point for that and now the challenge and the fun is to integrate the teams.