March 26, 2013, 4:46 PM

Wal-Mart: ‘We can do what no one else does’

The world’s largest retailer describes its e-commerce future.

Lead Photo

Wal-Mart's e-commerce headquarters in Silicon Valley.

Wal-Mart Stores Inc. has big plans for e-commerce, and today presented a picture of some of the initiatives it’s working on as it aims to become a major force in online retailing worldwide.

“We are demonstrating we can build whatever any other e-commerce company can do, and combine that with the world’s largest retailer to provide a commerce experience no one else can provide,” Neil Ashe, president and CEO of Walmart Global eCommerce, told reporters at Wal-Mart’s e-commerce headquarters in San Bruno, CA, during the company’s first “media day” dedicated to its online business.

Specifically, Wal-Mart announced today it will begin a test this summer that will allow consumers to pick up online orders in lockers at Wal-Mart stores.

About a dozen stores will participate in a single metropolitan area, company executives say.

The company provided few details, but said shipping to the lockers will be free, as is shipping for customers who place orders at Walmart.com for delivery to a Wal-Mart store. That Ship to Store program has been in place since 2007, and was extended in 2011 to include shipping to some 660 FedEx Office stores in the U.S. The lockers will give shoppers 24-hour-a-day access to their items; with Ship to Store they pick up items at customer service desks that typically are open from 10 a.m. to 10 p.m.

Wal-Mart will be testing a service similar to one that chief online rival Amazon.com Inc. has in which orders can be delivered to convenience stores and some Staples Inc. and RadioShack stores. Google Inc. last fall also bought a company, BufferBox, that enables online deliveries to lockers in Toronto-area stores. Amazon is No. 1 in the Internet Retailer Top 500 Guide, Staples No. 2, Walmart.com No. 4 and RadioShack No. 275.

The delivery test is one of many ways Wal-Mart is working to combine its online assets and 10,000 stores worldwide to delight customers, Ashe said.

He highlighted several products of Wal-Mart’s e-commerce team, which now numbers 1,500 employees in Silicon Valley, south of San Francisco. For example, he pointed to Walmart.com’s new site search engine, which went live in August and since then has increased conversions from site search results by 20%, Ashe said.

The search engine is part of a project Wal-Mart launched 18 months ago, called Pangea, to redevelop its e-commerce technology platform. The aim is to create a common technology that runs Wal-Mart’s 10 e-commerce sites around the world. Besides Walmart.com, that includes sites for Sam’s Club and Asda, the U.K. grocery chain that Wal-Mart owns.

Today the company’s retail sites run on disparate platforms, making it hard for an advance on one to be replicated by another company site, said Jeremy King, senior vice president and chief technology officer for Walmart Global eCommerce.

The new technology platform is designed to connect customers worldwide with the broadest possible range of products, King said. “We are trying to set up a system that will connect every product in the world with every customer in the world and let them decide how they want to shop,” he said.

Walmart.com also is in the process of dramatically increasing its selection. The site now offers nearly 2 million items, 35-40% more than a year ago, and about 10 times as much as a typical Wal-Mart store. “We’re looking to double that this year, and we’ll grow to tens of millions in years to come,” said Kelly Thompson, senior vice president of merchandising for Walmart.com U.S.

Only 300,000-400,000 of the items on Walmart.com are owned by Wal-Mart, with the rest offered through six retailers that participate on the Walmart.com marketplace. Ashe said Wal-Mart is on the verge of launching a new phase of its marketplace, which could include bringing in new outside retailers, “but whoever participates has to participate at our standard of customer care.” The six participating merchants are Wayfair LLC, No. 50 in the Top 500 Guide; Plumstruck, which is part of Hayneedle Inc., No. 85; eBags Inc., No. 103; ProTeam (part of Dreams Inc., No. 16); Tool King LLC, No. 320; and Shoebuy.com Inc., No. 90.

While Ashe did not say how much Wal-Mart is investing in e-commerce technology and expansion, he said the e-commerce operation is not yet profitable. Wal-Mart executives have said they expect the online operation ultimately will produce at least a 20% return on invested capital. “We’re confident that e-commerce ends up being profitable and accretive to return on investment,” Ashe said.

The world’s largest retailer by sales is hiring aggressively for its e-commerce team, which Ashe calls “the world’s largest startup.” While the e-commerce team has been based in Silicon Valley since 2000, it took a more technology-oriented turn in 2011 when Wal-Mart acquired a social media and mobile commerce startup called Kosmix and formed around that team an e-commerce research and development team called @WalmartLabs, which is based at the San Bruno headquarters.

Wal-Mart since then has acquired about a half-dozen technology startups and folded them into the e-commerce team. King, the e-commerce operation’s chief technology officer, says he is authorized to hire hundreds of more employees in 2013.

Wal-Mart is on track to reach its previously stated 2013 goal of $9 billion in global e-commerce sales, Ashe said. He also noted that traffic to Walmart.com is up 20% over a year ago, and that about a third of its online traffic comes from mobile devices.

Ashe did not directly address how Wal-Mart competes with Amazon online, but said “we don’t shy away from any competition. We don’t have a perfect overlap, geography- or category-wise with any of our competitors, but we think of ourselves as a retailer and a technology company delivering a service no one else can deliver. We recognize we compete with pretty much everyone, and we’re comfortable with that.”

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