Digitization of Walmart

Walmart is digitizing its entire supply chain as it moves to an omni-channel strategy, wherein it provides an integrated shopping experience across online and offline channels, and looks to compete against Amazon. As Walmart makes this shift, it is leveraging technology to share information across the supply chain, track inventory, better select and manage inventory across stores & warehouses and provide expedited deliveries for online orders while maintaining competitive prices and quality. While Amazon continues to disrupt retail through its digital-first supply chain and go-to-market strategy, Walmart is digitizing its business processes to accurately anticipate and respond to customer trends. Furthermore, as Amazon pursues vertical integration through its private label products, Walmart is leveraging its position as the largest retailer in the US to help its suppliers embrace digitization and compete against Amazon.

Walmart is taking critical, strategic steps to embrace digitization:

Near-term steps:

1. Expansion of online channels: acquisition of Jet.com for $3.3 billion in August 2016 to expand its online presence and provide a more competitive online experience for customers. Since the acquisition, Walmart’s digital inventory of goods has grown from 10 million to 67 million and is now able to target the millennial customer base. Furthermore, the technical expertise from the Jet.com team is enabling Walmart to embed technology and modernize processes across its businesses. [1] [2]

2. Information sharing across the supply chain:

(a) Large investments in big data, analytics and machine learning capabilities in the form of projects such as Data Café (Collaborative Analytics Facilities for Enterprise) [3] – one of the world’s biggest private clouds to analyze internal and external data source to generate insights about customer demand, assess supply chain efficiencies and optimize operations. Walmart is making Café available to all its suppliers for free to get insights into customer demand, assess campaign conversion rates and better manage their supply and inventory.

(b) Leveraging content service providers such as Salsify to aggregate digital data from all suppliers so that it can quickly order new merchandise based on customer demand [4]. For example, when a customer searches on Walmart.com for a product that Walmart does not have, Walmart can quickly look-up service providers such as Salsify to determine which supplier has the product and the deliver the product to the customer’s home.

3. Optimize delivery of goods using store associates and machine learning: Walmart is leveraging its large network of store associates to make deliveries for customers on their way to work and on their way back home. It is using machine learning to ascertain which products should be delivered by which associates and what routes should they take to optimize the deliveries.

Medium-term steps:

1. Leveraging next-generation technologies such as blockchain, a public, decentralized ledger, to digitally track products across the supply chain: Walmart is partnering with IBM to leverage blockchain to digitally track food products across the supply chain to ensure quality and authenticity. Blockchain makes all the parties in the supply chain more willing to share information which makes the supply chain more efficient. For example, Walmart, completed a test using traditional methods to trace the origin of mangoes in 6 days, 18 hours and 26 minutes. By using blockchain, it took Walmart just 2.2 seconds. [5] [6]

2. Investing in in-store IoT to make the customer experience more seamless: digital carts that help customers shop by making recommendations and informing about promotions, automated checkout, unifying online and offline customer profiles to better target products and promotions at customers. It is also experimenting the use of RFID chips on products to better monitor product usage and manage product placement and inventory.

Other steps Walmart can take to digitize its supply chain and operations:

1. Walmart can work with suppliers to provide more real-time visibility into inventory levels across its offline and online channels to prevent stock-outs and improve customer retention.

2. Walmart can also look to collaborate with selected other retailers to achieve efficiencies across warehousing and deliveries and more effectively compete against Amazon.

Open questions:

1.How can Walmart better optimize and leverage its 5000 stores across the US to provide a smarter and cheaper omnichannel experience for consumers?

2.How does Walmart transition its large, existing customer base to its online channels instead of losing them to Amazon?


[1] Business Insider, October 2017 http://www.businessinsider.com/walmart-stock-price-jet-acquisition-one-year-later-2017-10

[2] Business Insider, August 2016 http://www.businessinsider.com/walmart-is-buying-jetcom-2016-8

[3] Forbes, January 2017 https://www.forbes.com/sites/bernardmarr/2017/01/23/really-big-data-at-walmart-real-time-insights-from-their-40-petabyte-data-cloud/2/#17223541113f

[4] Digital Commerce, April 2016 https://www.digitalcommerce360.com/2016/04/28/wal-mart-suppliers-help-us-identify-new-products-sell/

[5] Forbes, August 2017 https://www.forbes.com/sites/rogeraitken/2017/08/22/ibm-forges-blockchain-collaboration-with-nestle-walmart-for-global-food-safety/#70d956683d36

[6] Chartered Institute of Procurement and Supply, 2017 https://www.cips.org/supply-management/analysis/2017/june/case-study-walmart/

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Student comments on Digitization of Walmart

  1. Really interesting to see what a giant like Walmart has done as compared to a slightly smaller giant such as Target (who I wrote about). I’m curious what you feel the biggest risks are for Walmart… you mentioned the future of using IoT for better customer experience in store. I wonder how you feel that relates to inventory management. In particular, I feel that one of the biggest challenges in going into omnichannel is the difficulty in the unification of inventory management, and while it’s nice to have an enhanced customer experience through IoT, that feels almost secondary to inventory management risks.

  2. It’s interesting to me that Walmart is giving its suppliers access to the Data Café. While I can see how this is beneficial to both Walmart and its suppliers in the short-run, I wonder if it will speed up Walmart’s disintermediation in the long-run.

    Walmart is essentially training its customers to leverage technology to improve their operations. Digital technology is often the most common avenue suppliers use to disintermediate their retailers. By training their suppliers to be more tech-savvy, is Walmart essentially training them to become more independent? Right now I recognize that Walmart owns this technology and data, so it would be difficult for suppliers to go out on their own and operate without it. As customer data continues to proliferate across the economy, however, I wonder how long it will be before suppliers won’t need Walmart to provide data access or infrastructure.

  3. It’s a significant and essential move to go e-commerce. Moreover, digitalization is important to retail business nowadays. With strong information system, retailers can collect shopper’s data efficiently. With e-commerce site, retailers can even trace shopper’s action and journey effectively. Thus, Walmart should keep investing in digital analysis to upgrade their supply chain efficiency and inventory control.

  4. While the trend towards omnichannel is largely supported, I’m not sure brick & mortar is going away. The article states that Walmart needs to move online is a defensive move to continue competing with Amazon. While I don’t disagree that the acquisition of Jet.com was largely a reactionary move (not to mention other ecomm acquisitions in the space, such as Shoebuy (in reaction to AMZN/Zappos), Moosejaw, Modcloth, Bonobos), WMT may be endangering its core by chasing dilutive digital sales, warns retail analyst Nick Egelanian, president of retail development consultants SiteWorks International. WMT may simply be trying to find “speedboats” that are the cool kids on the ecommerce block, and as a result, taking shortcuts to gain an online presence rather than building their online brand the right way as digitally native brands have been doing by developing a loyal following. Brick & mortar locations will be around to come, but how that experience may look like in the future will almost undoubtedly be different – perhaps moving to more experiential shopping – think Costco’s free samples. Happy to chat more about my thoughts on that offline!

  5. I get worried that Walmart is going away from its core business model and customer value proposition by trying to directly compete with Amazon. For example, targeting millennials seems like a fool’s errand for Walmart. Walmart’s investments in things like the Bonobos acquisition, machine learning, and AI – while potentially beneficial – are likely expensive and longer-term in nature, and likely pay off less directly/quickly than Amazon given their different customer bases and corporate competencies (this article helps articulate my viewpoint: https://www.forbes.com/sites/panosmourdoukoutas/2017/05/19/walmart-will-never-beat-amazon/#29654b079ed3) . Rather than trying to compete with Amazon directly on digital tech and distribution, I feel like Walmart would do well to stick to its core by expanding geographically and increasing share of wallet with its targetable market.

  6. I agree to the general direction of digitalization for Wallmart, but I would suggest to keep the offline channel from two reasons. First, standardized product such as electronics, household goods, and clothes can be digitalized whereas non-standardized product such as food would continue to stay in the brick and mortar stores for consumers to choose by it’s appearance and freshness. For example, some consumers are still going to Wholefoods instead of purchasing through Amazon Fresh due to it’s foods delivered doesn’t match the consumers standards. Secondly, there are certain sets of consumers that goes to brick and mortar stores in order to enjoy the space and experience. An easy example is how Barnes and Nobles doubled down on their business model and Amazon actually started to follow their success by starting a brick and mortar store themselves.

  7. Walmart has shown itself to be a very nimble competitor to Amazon. Walmart’s acquisition of Jet.com (and acqui-hire of Marc Lore) was the right move but the rules of the game have changed since Amazon’s acquisition of Whole Foods. Whatever Amazon is trying to do through its entry into brick-and-mortar retailing, Walmart should be able to do better. You suggest a lot of great initiatives but behind the initiatives are people. Walmart is based in Bentonville, Arkansas and the last time I checked, no one wants to move there. Amazon is building a second headquarters in some lucky U.S. city and Walmart needs to keep up in order to attract strong, technical talent.

  8. I worry that Walmart’s acquisition of Jet.com was ultimately detrimental to the business. While they saw it as a way to expand their ecommerce offerings, Jet was an ecommerce company riddled with problems that desperately needed to be sold. Walmart may have been able to acquire tech talent through the purchase of the company but I am not sure it will prove to be an ecommerce asset in the long term.

  9. I think there is a lot of potential for Wal-mart to become even more efficient, to be a better partner to suppliers, and to provide an even better customer experience, through digitization. Ideas such as providing customers with digital shopping carts and making suggestions for other products the customer might want increases sales for Wal-mart and can also provide a useful service to customers. Expanding to e-commerce can allow customers to buy product from the comfort of their own home. And digitizing inventory data can be useful so that orders are automatically re-filled when quantities run low.

  10. I very much agree with Jason on this; I am convinced that brick & mortar locations will not go anywhere, but that experience in these locations will potentially look very different in the future. If anything, Amazon’s recent moves into physical retail (e.g., their bookstores, the acquisition of Whole Foods) support the idea that brick & mortar is far from dead.

    Walmart is a company that has deep pockets to compete, but more importantly, it is a company that has innovation in its DNA (from basically making bar codes universal to transforming the way shoppers think about value). A big challenge will be around the acquisition of the top technical talent that is needed to compete with Amazon.

    In any case, very interesting write-up – very happy to discuss offline.

  11. Not to play the same tune, but I also feel that the future of retail looks like a blended B&M/e-comm model. In a way, Amazon and Walmart could eventually converge to a similar form although they come from opposite ends of the spectrum. Walmart’s recent acquisitions – both Jet.com as well as others such as Bonobos – are attempts to jump start their earlier efforts to become more digital, with limited success to date. One initiative that Walmart recently launched that has been tremendously successful is leveraging their current B&M footprint to enable order online/pick-up in store which provides some of the convenience of traditional e-commerce and solves for some of the challenges in e-comm market growth beyond the wealthier, more urban/suburban core. Here, we see Walmart is leaning in to their edge and differentiate themselves compared to Amazon rather than chase after bolt on pure play acquisition targets.

  12. In China, Walmart is closing over 30 stores in recent years because of the strong impact from Alibaba and J.D. com. People, there are not willing to spend the time to shopping and are craving for high value and personalized products from worldwide. Reaching a much broad assortment of goods in a few seconds, paying a good price even lower than Wal-mart and having it delivered to your home within one-day, I don’t see any chance the billion Chinese consumers will return to the brick-and-mortar Wal-mart. While the digitization of supply chain for sure improve the efficiency and optimize the cost of Wal-mart, the fundamental concern the loss of business model comparing with e-commerce. I was wondering how much Wal-mart wants to change itself, maintaining its identity and competitive edge and keeping up with the trend. Will digitalizing supply chain suffice or will it digitalize its business model? If it’s the latter, is it still Wal-mart? Is it still a leader in retail industry or a follower that has to strive to find a place in a new era of consumption?

  13. This was a strong overview of the efforts towards digitalization that Walmart has pursued over the past years. I believe that the greatest demonstration of these efforts, as you astutely pointed out, was the acquisition of Jet.com for $3.3billion. Jet.com acts as a standalone entity with Walmart but is able to leverage their data and online expertise with the wealth of product and consumer information that Walmart has amassed. Further, they have acquired several businesses since the induction of Jet.com raising the question of what is their goal in the ecommerce space and at what point might we see Jet.com simply turn into Walmart.com?

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