There’s a question that Marc Lore asks himself a lot:
How do we win in the future of retail?
‘We’ is Walmart and Lore, former boss of jet.com, acquired by the retailer in 2016 to bolster its e-commerce capabilities, is now CEO of Walmart e-commerce US. In that capacity, he’s looking to take the resources of the wider firm and “start to play offense” on an increasingly competitive omni-channel battlefield:
This is an area that gets me really excited. When I think about playing offense, I think about how do we make sure Walmart.com is the primary destination when people think about shopping for their online orders.
Right now, Walmart’s offline store network is the biggest area of offense-playing to which Lore points:
We've got 4,700 stores within 10 miles of 90% of the population…If you look at delivery speed, it's moving towards same day. Customers want product faster than ever before, and nobody is better situated to deliver same day. We can deliver same day the entire supercenter - fresh, frozen and everything else - at a lower Cost-to-Serve than anyone else, because of a few things.
One, we're moving product in full truck loads, from the RDCs (Regional Distribution Centers) to 4,700 stores. That’s something that the stores have really mastered. Number two, these stores, they're already profitable. So if you think about them doubling as a warehouse, when you think about that marginal cost to pick that item out of there, all the fixed costs are covered. If you'd open up a dark store warehouse, you've got to cover your fixed and you need to do a certain amount of volume.
Next up is ever more focus on that same-day delivery goal, he says:
I think we're in a really, really good place to start playing offense with same-day delivery, but we've actually started to play. At the beginning of the year we started to roll out same-day delivery and the stores' team has done an amazing job of rolling this out with speed. By the end of this year 40% of the US will have access to same day delivery - that’s in over 100 markets - and by the end of next year over 60% of the population, that's about 200 markets.
There’s a wider objective here, adds Lore:
I expect this to be a great way to sort of build that sort of primary destination back with consumers on dot com. Then as we bring together that same day delivery for grocery, combine it with the Walmart.com site in the future, hopefully we'd be able to monetize those relationships people coming back every week to sell into that long tail that we're so focused on building.
The other ‘offense’ area that Lore points to is in relation to digitally native vertical brands. Lore explains:
We bought ModCloth last year, we bought Bonobos. This year we launched our own incubated, our own mattress company called Allswell, which is doing really well. We proved that we can actually incubate these brands and then we recently bought ELOQUII. Now, I think it's really important to just stress the difference between these digitally native vertical brands and the specialty retailers…Specialty retailers are really about helping to sort of grow our first party business and accelerate. And they're selling third party goods so they're getting its access to a lot of brands. This is much more offensive. This is thinking about a future world in which, there's SKU (Stock Keeing Unit) parity.
Lore is also focused on elevating the experience and the look and feel of the Walmart.com site:
This is again is as much for the customers as it is for attracting brands. There's a lot of premium brands that currently aren't on Walmart.com that we want to attract. This was a big lever that needed to be pulled, and it's working. We've definitely seen more interest from the brands.
As part of this, walmart.com has been upgraded to be more modern in appearance:
It's more personalized. It's more localized. We really make pickup and same day delivery a much bigger focus. We're definitely seeing traffic, a lot more traffic, coming through in that regard.
There’s also focus on positioning jet.com as a complementary channel, adds Lore:
We also at the same time just recently launched new Jet.com website, and we really wanted to position Jet.com and push it more upmarket and really focus on the higher income, urban millennials. It's much more curated. It's got that sort of themed homepage. We’re going to be rolling out themed home pages for each of the major cities. We're definitely attracting much more premium brands on the site. We've got Nike, we've got an Apple Mac store, So we're definitely targeting a very different customer with Jet than we are with Walmart.com.
I think both brand are very complementary. They’re both leveraging the same back-end infrastructure and logistics, so we're getting a lot of synergies there, but on the front-end, they're targeting very different customers. The Jet.com relationships we're building with brands we believe will be beneficial and helping to bring those brands on to Walmart.com in the future.
In all this, there’s another question that arises, as Lore notes:
We pretty much get parity on pricing now online with everybody matching. There will be a point in time, where everybody sells everything that everybody else sells. And so how do you differentiate? How do you actually create a reason for customers to shop on your website versus your competition?
A solution is to have more and more proprietary content and a focus on innovation, suggests Lore:
The idea is over a long period of time to continue to incubate and buy and build, so we have a portfolio of brands and unique content.…We need to prepare to win what the future game looks like 10 and 20 years into the future.
This is where the Store 8 initiative comes in, a try-and-test incubator unit for Walmart:
We've been really busy in the last year and we've actually incubated five companies inside there. These are the companies that have the potential to shape the future of retail. Ring-fenced from the rest of the organization, they're able to move with speed. We hire a CEO, we give them capital and they run. This is not a sandbox or an R&D sandbox. Each start-up has a vision for how and what it wants to be, and how it's going to change the future of the company. Again, we're thinking more like 10 years out.
Lore points to Jetblack as an example of the kind of work being done inside Store 8:
This is conversational commerce. This is about using text and voice to buy absolutely anything you might want. So you can just text Jetblack and say ‘water, ice tea, Cheerios’ because you would have gone through an extensive on-boarding. It knows what brands, it knows what sizes and all you have to do is text those things and you'll get a text back that says, ‘Here’s the products that's coming today’.
You could also say you need a gift for a 15-year old girl, $200, and it'll come back with three amazing recommendations. The recommendations are so good because of the on-boarding and the personalized approach, so that 79% of the time people are actually taking the recommendation that we make. I think this really plays to Walmart's unique strengths around product and merchandising. So we're investing a lot in sort of the recommendation engine, we're investing a lot in the decision trees and we're seeing lots of conversations.
Because these conversations are sort of today largely human-powered, we're seeing exactly how people would ideally want to converse. We need those conversations because the more conversations we have, the closer we are to be able to use machine learning to automate it. That's the long-term goal. Ten years from now, they're not going to be humans. We’re going to have seen enough conversations that this will be automated. I do think that this is the future and the way people are going to shop. People are not going to 10, 20 years from now be using search the way they do today. It'll simply be a voice or text communication.
Overall, it’s a big ‘to do’ list, concludes Lore, but achievable:
At the same time we're playing offense, especially with same day delivery, we’re building companies to shape the future of retail. We haven't lost sight on what it's going to take to win 10 years out.