Eye on Retail: The Impact of Ecommerce on Walmart
As the planet's largest retailer, Walmart occupies a retail position envied by many. It is not without its challenges, though, e-commerce among them. Cracking the code on how to approach e-commerce and m-commerce (mobile) are near the top of the list of Walmart's big strategy plays.
Following the, "if you can't beat them, buy them," strategy, Walmart spent $300 million earlier this year to buy a startup application ("app") development company called Kosmix. Kosmix had a flagship app that tailored Twitter content based on users' interests. The app, known as Tweetbeat, doesn't even exist anymore, but Walmart took the startup's founders, Venky Harinarayan and Anand Rajaraman, and put them in charge of the newly created Walmartlabs. Walmartlabs is Walmart's think tank/research and development arm for all things internet.
The two Kosmix founders left Walmart earlier this month to move on to their next venture, but continue to advise Walmart, according to Walmart executives. Harinarayan and Rajaraman have a track record of effectively deploying internet retail solutions, having sold an application called Junglee to Amazon in 1998. Junglee became the Amazon Marketplace of third-party vendors and it now accounts for nearly 30% of Amazon's sales. To understand Walmart's view on, and commitment to internet as a part of its retail plans, you only need to read a quote from Anand Rajaraman, who said, "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."
While Walmart has always been known for its aggressive stance on being the lowest price leader, it has lost footing in this area as price gaps between it and competitors has vanished. Perception among shoppers has even shifted and surveys have revealed that many shoppers no longer think Walmart has the lowest prices. The company's annual report for 2012 boasts a $2 billion commitment the company will make in the coming year towards lowering prices and expenses, while simultaneously wringing more productivity out of its stores. This is a tall order for the retail giant, but senior management has made public commitments to this strategy and they intend to deliver on it.
Among its other major projects, Walmart is remodeling nearly seventy percent of its stores by the end of 2012, while downsizing the footprint of their average new stores by about eight percent. Company executives estimate this will drop about sixteen percent savings to Walmart's bottom line and they expect the new stores to be more efficient overall than existing stores.
Another big initiative of Walmart's is an expansion of their electronics product offerings in an effort to grab some of the market share vacated by Circuit City's exit from the industry in 2009. Some figures indicate Walmart has actually gained some share, even while electronics giant Best Buy has lost some.
All these strategic initiatives can't erase the fact that Walmart has had three straight years of decreases in same store sales, a key indicator for any retailer, and a statistic they are not happy about, to say the least.
One thing about Walmart is certain, and that is the company will not sit idly by while trends that affect their market position unfold around them. The company's stores are meant to appeal to everyone, and they have some of the brightest minds working on numerous initiatives to ensure they don't slip from the top spot as the world's largest retailer. Amazon, eBay and many other online retailers are growing by leaps and bounds, and bricks and mortar retail continues to be a tough market to stay competitive in. But, don't count Walmart out. They didn't get to the top spot in retail by lagging behind in technology, and they stand to be a force to be reckoned with for many years to come.