Walmart seeks boost from tech with Labs
Developments in search and e-commerce could help retailer leapfrog over competitors
■ BY JACK NEFF firstname.lastname@example.org
WALMART IS IN A BIND.
Its retail empire is based on a simple
proposition—everyday low pricing—
but recent surveys show price gaps
between it and rivals have actually narrowed or disappeared. And, in fact,
most of its shoppers no longer believe
Walmart has the lowest prices.
Among the factors that have played
into this is technology. Walmart has traditionally been a leader in the space,
using its Retail Link sales-data system,
for example, to leapfrog rivals by analyzing what is in its shoppers’ baskets
and capitalizing on trends. But over time
competitors caught up with database-driven loyalty programs that direct discounts to consumers on items that matter most to them, making them more
targeted and price competitive.
With Walmart same-store sales
now starting a third straight year of
decline, it’s clear the retailer could use
another tech breakthrough or two.
And it’s looking to @Walmartlabs to
The retailer spent $300 million earlier this year to buy Kosmix, a startup
best known for an app that tailors
Twitter content to users’ interests. The
app, Tweetbeat, doesn’t operate anymore, but the acquisition is really more
of a nine-figure investment in retailing, marketing and social-media R&D.
Venky Harinarayan and Anand
Rajaraman, the entrepreneurs behind
Kosmix, now head @Walmartlabs, a
70-person R&D operation based in
Mountain View, Calif., as senior VPs of
e-commerce for Walmart.
Previously, the two did a lot for
Amazon, a Kosmix
investor before the
Walmart buyout. They
created Junglee and
sold it to Amazon in
1998, where it became
the Amazon Marketplace of third-party vendors that today drives 30%
of the e-tailer’s sales. They also developed Amazon Mechanical Turk, a
crowdsourcing site where people sign
up to do small tasks for small payments.
With @Walmartlabs, they have an
arguably bolder vision. Mr. Rajaraman
says in a quote used in all the unit’s job
listings: “Social media and the mobile
phone will have as profound an effect
on the trajectory of retail in the early
years of the 21st century as did the
development of highways in the early
part of the 20th century.”
So can @Walmartlabs let Walmart
leapfrog over rivals on that road the
way the retailer’s past tech mastery
“I hope so,” Mr. Harinarayan said in
an interview. “That’s a tall ask. But the
good news is that the scale is so large
that if you can move the needle in a
positive direction, the impact is large.”
Meanwhile, @Walmartlabs is mixing in some smaller ideas and projects
specific to e-commerce, where the
giant trails Amazon by at least six to
one. Just closing the gap with Amazon
wouldn’t solve all Walmart’s problems,
but it would boost sales more than 5%.
“I’m a firm believer when you run
a lab, if you are doing only very speculative long-term things, you run the
risk of not having wins that help you
cement your position in the organization,” Mr. Harinarayan said. So in the
early going @Walmartlabs is building
the next generation of search and
“helping with marketing” for
Walmart’s online properties globally,
he said. “Then we also have some
much more speculative, strategic,
long-term-payback opportunities that
involve social media,” he said, aimed at
creating better shopping experiences
online and offline.
In one experimental project expected to debut for the holiday season,
@Walmartlabs has been recruiting
people to test Shopycat, a Facebook
and web app that uses people’s social-media profiles and comments to generate gift ideas.
“Most of the recommendation systems you see today in online shopping
are based on prior transactions,” said
Mr. Harinarayan, who worked for
Amazon in the late 1990s when its
system was developed. The system
works well for books, where people
tend to buy in the same genres, he
said, but so much not elsewhere.
“It’s our belief that more than past
transactions, your interests and what
interests of yours are trending are better predictors of what you’d be interested in buying,” he said.
Kosmix founders Venky Harinarayan, (l.), and Anand
Rajaraman now head @WalmartLabs, a 70-person R&D
operation that seeks to build the next generation of search as
well as create payback opportunities through social media.
But where @Walmartlabs could
have its biggest impact is helping
Walmart counteract competitors’ loyalty programs and regain lost ground
in the battle for price perception, said
Leon Nicholas, managing director of
Kantar Retail. Walmart has long
rejected shopper cards as gimmicky
and inconsistent with its everyday low
price strategy. But Mr. Nicholas
believes @Walmartlabs could develop
a program consistent with EDLP and
incorporating Walmart.com and
mobile devices to provide deals across
a wide assortment.
He suggested Walmart program
members might input a shopping list and
let Walmart.com or its mobile app offer a
package deal on select brands that would
be lower than buying them individually.
It might also be used to compare prices
on the basket to other nearby retailers or
offer additional deals on bigger baskets.
Or, as Mr. Nicholas envisions it, a shopper with $10 or $20 in her pocket could
use a mobile app outside the store to ask
for the best deal on a bundle of products.
Mr. Nicholas called the concept “EDLP
for me” and believes brands would pony
up trade funds to participate.
“What they can’t do is stay in their
comfort zone,” Mr. Nicholas said. “If
Hear more about
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Walmart revolutionized sales data
through Retail Link, they surely can
revolutionize shopper discounts.”
But all that would be a tall order,
even if it were possible technically.
“At this point, I’d say that’s not
something I could comment on
because it’s not in our direct path,” Mr.
Walmart U.S. CEO Bill Simon in
June reiterated Walmart’s longtime
opposition to loyalty programs,
though a spokesman declined to comment on the “EDLP for me” idea.
Others close to the company noted
longtime difficulties getting
Walmart.com and Walmart to work
together, though the retailer has
increasingly tried to coordinate online
and offline efforts, such as through
nationwide “site to store” shipping and
a recent management restructuring.
Last month, two top e-commerce
executives left Walmart’s Brisbane,
Calif.-based e-commerce unit, which
now reports to Mr. Simon. E-commerce units now also report to the
heads of the offline stores in the U.K.,
Japan and Canada.
In the rest of the world, e-commerce continues to report to Vice
Chairman Eduardo Castro-Wright,
and Walmart.com has said in job listings it’s preparing to step up online-only offerings in the still-vast areas of
the world where it has no stores,
including continental Europe and
much of Asia and Africa.