Walmart's digitally-ready for the Holidays as bosses talk up AI and ML to cope with Vaccine Economy retail challenges

Profile picture for user slauchlan By Stuart Lauchlan November 17, 2021 Audio mode
Summary:
Automation is set to play even more of a role for Walmart as the retailer adjusts to new and challenging market realities.

Walmart

It’s widely held that this year will see Black Friday et al kick in earlier than ever, but for Walmart that’s yet to be seen, although CEO Doug McMillon remains confident of a strong Holiday season despite supply-chain pressures, declaring:

In the seasonal areas, we're ready for Christmas. In the US, we're ready for the Holidays too. There is a level of excitement in the year. You can feel it. I've been walking away from stores with the recurring thought, 'We're ready!'. 

The retailer yesterday turned in Q3 numbers that saw net income drop to $3.11 billion from $5.4 billion in the comparable quarter of last year, on $140.54 billion in revenue, up from $134.71 billion last year. Online sales were up 8% in the US year-on-year, but using pre-COVID comparisons from 2019, that’s a growth rate of 87%.

As an essential retailer, Walmart has been on the COVID frontline for nearly two years now, with the global supply-chain crisis and rising inflationary pressures in the US adding further challenges to the operating mix. McMillon observes:   

Walmart has served customers across economic cycles for more than 50 years. Each one is unique and they require us to adapt. In this latest cycle, the pandemic caused shifts in how customers and members shopped and what they purchased. The long period of sustained demand for goods has stretched supply chains, resulting in out-of-stocks and inflation.

Fighting inflation is in the corporate DNA, he boasts:  

We haven't seen this kind of inflation in the US for quite some time, but we have operated in markets where we've seen this basically forever and even more extreme, so that experience is helpful. We do start with wanting to keep prices low. The purpose of the company is to save people money and help them with a better life, and we get excited about trying to do that. And the company is kind of hedged well, if you think about it. With an inflationary environment, there are things that come along with that. And in a deflationary environment, we can lean down and we're a low-cost operator and we can take advantage of those situations. So in this case, our cost inflation is higher than our retail inflation and that's what we would want. 

Tech-enabled

Delivery remains a key competitive differentiator, says McMillon, powered by its white label Delivery-as-a-Service platform, Spark Driver:

Spark continues to grow and is now active in 900 US cities, providing access to more than 50% of US households. And we're just getting started. We recently enabled a new feature within the Spark Driver app called Shipping and Delivery, which gives service providers the option to ship and deliver customers' orders. So, if delivery slots are full at a location, this feature allows us to serve that demand. The Spark platform has a lot of potential in the US and beyond.

That said, there’s still work to do organizationally, he adds:

The thing that comes to mind is the change that has to happen and has happened to an extent and continues now related to working in a more digital fashion. We use a phrase here that's called ‘four in a box’, which is an agile way of working with customer, product, design, technology, engineering, all around the table, designing omni-channel outcomes for customers and members.

Historically, if you look back years ago, the company would have operated in specialized silos, merchandising operations, finance, logistics, etc., and the teams learned in recent years and is still learning how to move faster, again with the end in mind, designed with that outcome, and that enables us to put technology to work in a way that is truly omni-channel, not siloed. Customers and members expect that we've got unique opportunities to deliver that. But the change inside the company has to happen to enable it.

Artificial Intelligence (AI) tech is playing more of a role in this ‘four in a box’ mix, adds John Furner, CEO Walmart US:

Quite simply, we look for customer problems, associate problems, friction in the environment and then we assemble a team of people which would include someone representing the customer, the business, product, technology, design, and these groups work through each of the problems and create digital products to take the friction out.

Along the way, the real benefit is the data that's generated from these products. One example is how we're managing our backrooms of supercenters. There have been markets around the country using computer vision and Augmented Reality (AR) to not only know what's in the backroom, but what can be moved to the floor. AR is a way for associates to know how to direct work, and from that we generate literally billions of pieces of data every week and it's helping us with overall inventory management. 

We're using ML (Machine Learning) and AI to do a number of different things. We used it to help adjust to the pandemic and use the stores as fulfillment hubs. We use it for predictive baskets, smart substitutions. Our in-stock assistance is AI empowered. And this modernization that we've been talking about is continuing, which unlocks more capability to use that data. We've moved 153 petabytes of data to the cloud so far, and we've got room to grow there. We can put data and machines to work in ways in this company that we've not yet done, but we are making progress.

Overall, expect more automation of processes, McMillon predicts:

We'll be talking more about that in the future, but if you just go back and review what we said [earlier this year], we've got opportunities in distribution centers, fulfillment centers, around the world to deploy new technology that will help us with productivity. That will take some capital investment, but if you look at what it delivers on the other side for customers and members as well as from a productivity point of view, we continue to be excited about that.

My take

One stat of note that jumped out of the post-results analyst call was the revelation that Walmart’s e-commerce marketplace now has around 160 million products available, 21 million up on Q2.  That’s bound to catch the eye at Amazon, even if there’s a hell of a long way to go for Walmart to catch up. Meanwhile, onwards to the Holiday season and a changed retail environment. As McMillon sums up:

I think pick-up and delivery around the world will grow and the step change that occurred will stay and then grow from there probably at a lower rate. That's what we're seeing here. But the store traffic's the biggest issue. When the pandemic enabled it, people came back to stores and I think they like stores. They want to have that experience. They enjoy seeing merchandise, being around each other. That’s why omni-channel makes so much sense.