Walmart: Transition to a Digital Company

In 2015, Walmart made the daunting decision to put aside 2 billion dollars to ramp up its e-commerce business. The stock market responded by lowering Walmart’s stock 10%, obviously, investors were not confident on Walmart’s capability to compete in the digital world. The money was to be put towards adding more e-commerce fulfillment centers, fully developing its mobile app, improving customer experience, acquiring e-commerce companies, and expanding online grocery shopping. These plans seemed lackluster and derivative to investors and many thought the retailer was too far behind its competitors, Amazon and Target. However, in the two years since then, Walmart has had a yearly revenue growth of 3% and 40% growth in US e-commerce business. Furthermore, Walmart has become one of the front runners in innovative digital retail.

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How did Walmart catch up and become a real player in the e-commerce game? Or how did Walmart achieve digital maturity?

Walmart was one of the exemplary digitally maturing companies that Deloitte found in its 2017 Digital Business Global Executive Study and Research Project. “Digital maturity is about adapting the organization to compete effectively in an increasing digital environment” (Deloitte 5). Walmart had a long-term plan to strengthen its digital capacities so it could be a legitimate competitor in the virtual retail landscape. Chief Executive Officer, Doug McMillon, committed more than 1/3 of capital spending budget to digital projects, in ensure the company’s progression to a virtual business.  The company succeed at becoming digitally mature because it recalibrated organizational structure, talent, culture, and leadership to have digital at its core.

Because of this commitment to implementing digital strategies into the core of their business, Walmart was able to digitally mature quickly and vastly improve its online sales and e-commerce performance. Last Tuesday Walmart stock reached $84.96, improving 4.9% which was the biggest intra-day increase since May 2016.  The company also estimates U.S. online revenue of $11.5 billion by the end of this year. Walmart e-commerce division increased by 60% the last two quarters, which is about four times the growth rate of the E commerce industry sector (Wal-Mart Expects Online Sales to Surge 40%).

In addition to an increase in online sales, many innovations that have recently generated because of Walmart’s digitally maturity. The retail enterprise has spent billions on e-commerce fulfillment centers. The company it’s also adding a thousand new online grocery locations (doubling the amount of existing locations) to fulfill online food orders.  These online grocery locations will feature their curbside grocery service, which allows customers to order their groceries online and pick it up in the drive-through like model.  To supplement this Walmart is teaming up with Google to implement voice ordering, which is said to make the return process better for Walmart mobile app users. Walmart also scaled its online products offering to 67 million products—which is five times as much as they had the previous year.

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Walmart also purchased the e-commerce site Jet.com for about $3.3 billion, and is going to start implementing it to Walmart’s own website. Jet.com’s “smart-cart” buying system will lower prices by having customers agreed to packaging more products together, forgoing returns, and having customers use debit cards rather than credit cards. Walmart has also added new features to compete with Amazon such as free two-day shipping for orders over $35 and discounts on certain online purchases if they are picked up at the store. The retailer is also, planning on hiring 2,000 employees to specialize in specific categories of their online products. (Wal-Mart Will Bring Jet’s Smart-Cart Buying System to Its Site)

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Walmart also knows online groceries is its main point of competitive advantage and is testing multiple ways it could win in this e-commerce category. One pilot program it experimented with is where a delivery driver puts your online groceries directly into your fridge even when you’re not home—using a one-time passcode on your front door smart lock. This hypothesis testing approach shows Walmart transition from a traditional company that avoids risks and failures to a digital company that encourages risks and mistakes for the sake of innovation.

Additionally, Walmart is trying to attract better talent by recruiting ivy League students and adjusting their perceptions of Walmart and its culture.  The companies doing so trying to show potential employees that Walmart is a tech company, and that they will have digital opportunities and will keep their skills up to date with multiple occasions to learn and grow. Furthermore, Walmart is trying to stress its alignment with its multiple brands, especially those that have a better reputation in tech. Before the family brands were separate, such as Walmart and Jet.com, but now they are coming together so they are each improve building off the other’s strengths. Walmart is also offering high salaries in its e-commerce sector to attract and retain talent, its e-commerce unit it among the top 25 highest paying employers in the US (Wal-Mart Wants to Break Into the Ivy League Recruiting Circuit).

In conclusion, focusing your company to achieve digital maturity can help your company survive and thrive in the digital world. However, it is more than just investing in tech, it is about how your business is adapting in a digital environment. To foster such a change takes absorbing digital strategy to the core of the business in the culture, talent, and structure so that companies can operate effectively.

 

 

https://blogs.wsj.com/cio/2015/10/14/wal-mart-to-pour-2-billion-into-e-commerce-over-next-two-years/

https://www.bloomberg.com/gadfly/articles/2017-10-10/walmart-investor-day-getting-innovative-online?utm_content=tech&utm_campaign=socialflow-organic&utm_source=twitter&utm_medium=social&cmpid%3D=socialflow-twitter-tech

https://www.bloomberg.com/news/articles/2017-10-10/wal-mart-expects-online-sales-to-grow-40-as-it-chases-amazon

https://www.bloomberg.com/news/articles/2017-10-10/wal-mart-will-bring-jet-s-smart-cart-buying-system-to-its-site

https://www.bloomberg.com/news/articles/2017-10-10/wal-mart-recruits-ivy-leaguers-who-view-arkansas-as-deal-breaker

6 comments

  1. Really happy to see Walmart taking a big step into the eCommerce world – we can’t let Amazon have all the fun. I think their acquisition of Jet, which may seem small since they were a brand new company at the time, will be huge in the long run because of the systems they will help Walmart put in place allowing them to achieve digital maturity and effectively compete with Amazon.

  2. I think these are all great moves for Walmart. I’ve always wondered about their brand perception though. In my mind they’ve always been a low cost leader and sort of … cheap. And if I can stereotype a little, we’ve all been in their stores and seen the difference between Walmart clientele and Target’s (for example). Hopefully they can continue to grow and put themselves in that same online ordering perception that Amazon has.

    1. It’s interesting to think about that – because I have the same perception, Owen. However, so long as people are bargain shopping, if you can get the same thing at Walmart for cheaper, people often will do so. It’s crazy to think that investment in e-commerce not too long ago was a cause for concern. They’re lucky they did it now.

  3. Really interesting article. I too have seen Walmart’s online business become incredibly more robust over the past few years. I love that they bought Jet and are now better integrating both the brand personalities and reputations. I think this is Walmart’s biggest challenge it’s facing now– it has the tech, the crowd, the resources, the products, and the prices. But it’s reputation is in need of change to allow it to fully compete with the likes Target and Amazon- which have perceptions of low cost but not lower status.

  4. Nice post! I’ve been really impressed with what Wal-mart is doing in digital. I think if they can successfully pull off a digital transformation (and I think they might be able to), they will be the bellwether for all other companies to follow.

  5. Really cool post. I think it is interesting how much emphasis they are putting on groceries. With all of these new services popping up, such as InstaCart and AmazonFresh, and Walmarts continued innovations, it is starting to look like wheeling a cart around Star Market will soon be a thing of the past. I am really surprised they are looking into having people go into your home and put the groceries in your fridge, that seems kind of excessive. That being said, a few years ago we would have said the same thing about hopping in the back of a strangers car.

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