Five Ways Walmart is Investing in Technology
Walmart told investors total net sales growth will be relatively flat for fiscal year 2016 at its 22nd Annual Meeting for the Investment Community, in part to its investments in new technologies, including e-commerce and digital capabilities, as well as wage rates and store hours.
Total e-commerce and digital capital expenditures will be approximately $1.1 billion in fiscal year 2017. These investments have resulted in an increase in operating expense and a decrease in operating income. Operating income has been negatively impacted by declining gross margins in Walmart US.
"Now and finally we are going to build a digital relationship with our customers through improved site experiences and apps but also enhanced store experiences," said Charles Holley, Wal-Mart Stores, Inc. EVP & CFO.
Walmart is now one of the three most visited online retailers in the US.
Neil Ashe, President & CEO, Global eCommerce, said the company is building a digital relationship with its customers that is integrated into their lives to provide them with convenience and with time, by layering new digital capabilities over the store experience to make shopping faster and easier.
"We've built out the capabilities to deliver a high-quality, pure e-commerce experience, including replatforming our technology and our physical distribution. We are dramatically expanding our assortment, as well as the tools we need to win on price and add scale."
Ashe and others outlined five ways the company is investing in digital and supply chain technology:
1.Online Shopping with Free Pickup
The company recently announced it is offering online grocery shopping with free pickup to customers in eight new markets ranging from big places like Atlanta to smaller ones like Ogden, Utah, in addition to the five where already operating. Now the company is bringing this service to customers in 10 markets, including Dallas and Houston, Memphis, and in Tampa, which will put Walmart in 20 markets this year. The service will expand early next year to 20 more.
"Online grocery shopping is bringing new customers to Walmart. And it is deepening our relationship with the customers we already have," said Ashe.
2. Mobile Apps
Twenty-four million people are actively using Walmart's app each month and according to the company, it ranks among the top three retail apps.
"The Walmart app solves problems," said Ashe." A customer wants to refill her prescription, but needs to get out of the store quickly, she can save herself time by simply taking a picture of the label. She can pull up the mobile registry and see what to get her friend next weekend for the baby shower. When it's time to check out, she can get an e-receipt right on her phone. And thanks to Savings Catcher, she knows that if a competitor has a lower advertised price on something she just bought, she'll get that difference back rate on a gift card."
3. Assortment Advances
Walmart's new global technology platform Pangaea gives the company the ability to radically scale its assortment.
"We created smart pricing algorithms that we have now applied to nearly all of our items this year," said Ashe.
"Pangaea helps merchants manage a lot more items than they could under traditional pricing management methods. We've invested in price and we are meeting or beating our online competitors four out of five times," he continued.
Walmart.com has also moved to a responsive design, which adapts to whatever device consumers use. The company's data shows that almost 15 percent of transactions on Walmart.com occur across multiple devices.
5. Inventory Optimization
Walmart already opened new next-generation fulfillment centers in Pennsylvania, Indianapolis and Atlanta, and plans to open a new center in Southern California in the early part of 2016.
The company will connect its various types of DCs and stores to improve inventory accuracy and efficiency.
"Optimizing the inventory in our system is a huge lever to serve customers better and to take a lot of cost out, not only through transportation and handling but also through markdown elimination," said Doug McMillon, Wal-Mart Stores, Inc., President & CEO. "A dynamic connected supply-chain with improved forecasting leveraging predictive analytics can serve customers and reduce cost by merging truckload, pallet, case and each movement. Accurate inventory placement is a really good way to make money."
Walmart also plans to open source another piece of technology called OneOps, which allows Walmart to use multiple clouds, move applications among those multiple clouds.
"It has made our developers significantly more productive and it helps them deploy product enhancements much faster," claims Ashe.