Big Box Retail Reinvented: How Walmart’s Continuous Digital Transformation Maximizes Agility
Walmart stays ahead of the competition by embracing innovation and flexibility above all elseAdd bookmark
For over 30 years Walmart has reigned as the world’s biggest retailer both in terms of scope and profitability. However, as global competitors such as Amazon and Alibaba continue to proliferate, Walmart’s lead is narrowing.
To stay ahead of the curve and maintain its position as the #1 global retailer, in 2018 Walmart signed a massive 5 year “mega-deal” with Microsoft to overhaul its digital systems and move hundreds of existing applications to cloud native architectures. Strategically speaking, the goals of this collaboration were to:
- accelerate digital transformation across all areas of business and customer touch points
- amplify its ability to quickly and seamlessly launch new, convenient customer-facing features that are “uniquely walmart”
- build a digital-first workforce by fostering a culture of collaboration, creativity and communication
As Walmart’s CEO, Doug McMillon, remarked at the time, “Walmart’s commitment to technology is centered around creating incredibly convenient ways for customers to shop and empowering associates to do their best work."
Though they were only a little over 2 years into their partnership, Walmart’s “digital backbone” more than proved it’s worth when the global coronavirus pandemic hit this past spring.
First and foremost, its robust global, IT infrastructure enabled Walmart to quickly transition office employees to a work-from-home environment. In addition, they were also able to immediately optimize Walmart’s omnichannel purchasing experience based on real-time shopping trends such as increased demand for curbside pickup and grocery delivery.
In an effort to not only better accommodate a 74% increase of online orders this past spring, but also establish themselves as a viable alternative to Amazon for online shoppers, Walmart integrated all of its consumer applications into one central Walmart app this past March. Though this type of initiative could easily take some organizations months if not not longer to complete, Walmart was able to accomplish this ahead of schedule in just a matter of weeks. They also launched a contactless in-app scanning for self-checkout dubbed Scan & Go.
While many retailers were, sadly, declaring bankruptcy, Walmart’s third-quarter profits increased 56% and revenue hit $134.7 billion (5.2% increase), surpassing Wall Street’s expectations. This growth is a direct result of the many years Walmart has invested in developing and deploying a vast array of cognitive technologies such as robotic process automation (RPA), Artificial Intelligence (AI) and Intelligent Automation (IA) to maximize agility and business resilience amidst rapid change. The following is just a short overview of some of the pivotal digital initiatives they’ve launched over the past year.
To accommodate the pandemic induced surge in shoppers, Walmart needed to hire 500,000 new associates and promote another 200,000 workers as quickly as possible. To help streamline and enhance the candidate vetting process, Walmart partnered with Modern Hire to create data-powered pre-employment job-simulation assessments. Using AI and predictive analytics, these tools help accurately predict an individual’s performance level, retention risk and financial impact.
According to a recent article written by Walmart’s David Futrell, PhD, a senior director of Global Selection and Assessment, and Josh Allen, PhD, Director, Global Selection and Assessment Strategy, who spearheaded the project, the projected ROI of this new tool extends into the multi-millions if not billions.
As they put it, “A conservative return-on-investment analysis showed savings in the hundreds of millions annually. This estimate only includes eliminating replacement costs from not hiring the lowest scoring candidates. If we included estimates of lost productivity and training costs, the real impact might exceed $1 billion annually.”
Intelligent Contract Negotiations
Big box retailers like Walmart have always relied on low prices to attract customers. However, to accomplish this, Walmart must optimize hundreds of thousands of contracts with suppliers and vendors each year ranging from small, regional manufacturers to massive global conglomerates such as Procter & Gamble (P&G) to ensure consumer prices are as low as possible.
To do this more efficiently and effectively, Walmart is piloting Pactum, an AI software tool that can not only read and understand the priorities of both parties involved in the contract, but also negotiate on behalf of one of the parties via chatbot. According to Forbes, “ Pactum’s software doesn’t care about time and effort. It’s built to maximize the Pareto outcome; that’s where one party can’t get a better deal without hurting the other party. A Pareto-efficient result maximizes the outcome for both parties so everyone is better off when Pactum finishes its work on an agreement.”
As of now, Pactum works best when managing numerous, small, low-value initiatives that don’t justify the involvement of expensive professionals to conduct renegotiations. However, as the tool continues to be deployed and “learns” from experience, experts at Walmart and Pactume expect it to be applied to more complex, high level contracts down the line.
A common adage heard amongst innovators is “fail fast, fail often, fail forward.” Though not to be taken literally, it’s important to remember that a significant number of AI and robotics projects are never fully operationalized. Even if the technology itself is sound, as priorities for businesses often change faster than the pace of innovation, even highly promising tools can be rendered redundant or obsolete in a very short time.
For example, 3 years Walmart signed a multi-year deal to employ hundreds of in-store robots designed to scan shelves for inventory and alert associates to when merchandise needs to be restocked. Despite promising early results (Walmart had just ordered 1,000 more robots when the pandemic hit) by November 2020, the contract was canceled. Why? Because as e-commerce volume spiked due to the pandemic, Walmart no longer saw the need to optimize in-store inventory operations.
However, behind the scenes is a different story. In addition to the shelf-scanning robots, Walmart has also partnered Alert Innovation to pilot the Alphabot, a storage and retrieval robot. Used to optimize fulfillment center operations, these robotic carts retrieve items and deliver them to packing stations where a human packs them up for pickup or delivery.
Though the ultimate goal of these robots is to collect food more quickly and efficiently than a human worker would, one additional benefit of utilizing these robots is that it supports social distancing efforts by reducing the number of associates moving around the floor, collecting items.
The Future of Retail
In 2019, Walmart launched its Intelligent Retail Lab (IRL), “a unique real-world shopping environment designed to explore the possibilities artificial intelligence can contribute to the store experience.”
The goal of IRL is to test out new AI-powered in-store experience and, most importantly, gather information about what’s happening inside the store through using state-of-the-art sensors, cameras and processors. According to the corporate website, the cabling required to power these IRLs is long enough to scale Mt. Everest five times and contain enough processing power to download three years’ worth of music (27,000 hours) each second.
In addition to what one would expect to see in a Walmart (i.e. associates, 30,000+ item inventory, shelves, cash registers), IRLs also include new AI-powered features such as interactive, educational displays and kiosks where customers can learn more about the items they’re looking to purchase.
At least in the beginning, much of the technology was designed to help better track and manage inventory. For example, a combination of cameras, computer vision and real-time analytics automatically triggers out-of-stock notifications to internal apps that alert associates when to re-stock. However, the long goal of these IRLs is to support the creation of a fully interconnected digital ecosystem and enable the development of new data monetization schemes such as the AI-powered advertising capabilities.
Going forward, it’s very possible that Walmart will be investing less in in-store experiences and more in it’s online platform. In September of 2020, Walmart announced it’s creation of Walmart+, a monthly membership plan that offers benefits like free, same-day shipping, unlimited delivery, and discounts. They’re also in the process of piloting next generation last mile delivery capabilities such as delivery by drones and autonomous vehicles.