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The clever way Walmart is trying to beat Amazon

Real estate, baby.

The clever way Walmart is trying to beat Amazon
[Photo: Walmart]

Walmart is the biggest employer in the country and the largest retail company in the world, but it’s currently locked in a battle for consumers’ dollars with Amazon that dominates online shopping. Walmart hopes to leverage one staggering fact: 90% of Americans live within 10 miles of a Walmart store.

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In a recent talk at the South by Southwest (SXSW) conference in Austin, Walmart’s chief technology officer Jeremy King revealed how the company is thinking of new ways to take advantage of its vast physical footprint to make the shopping experience more convenient for customers, whether in-person or online.

The key: Walmart’s stores are doubling as warehouses for online shoppers. It’s something other retailers, including Target, are also trying to do to compete with Amazon. But no other traditional retailer has Walmart’s scale. “The greatest part about Walmart using the Walmart store is that store is already profitable,” King says. “If you can use those as warehouses, it’s a game changer for us. Most of the cost of e-commerce is in shipping. If you think about the ability to have deployed inventory five miles away from 70% of Americans, and you can figure out that last mile, you’re talking about a difference in profitability.”

[Photo: Walmart]

Fast, scheduled deliveries

At Walmart, users create shopping baskets online and schedule them for delivery whenever they want, adding items up until the night before the scheduled time. The reason they can order so late is because a fully stocked Walmart store is so close by. Also, Walmart uses a machine learning algorithm to predict which items frequent shoppers will want every week (King says that shoppers order the same items they ordered the previous week 85% of the time), so the company doesn’t have to worry about running out of stock–at least not too much. More on that soon.

[Photo: Walmart]

Convenient pickup

Because Walmart has so many stores that are close to so many people, it may actually be more convenient for someone to stop by their local store than wait for a delivery to arrive. Walmart stores now feature large vending machine-like towers where you can pick up an online order, and lockers for even bigger delivery items. These ideas are similar to Amazon’s self-service delivery lockers, which are often stationed in stores like 7-Eleven. But while Amazon pays a monthly fee to stash its lockers in other companies’ retail spaces, Walmart already has the real estate to scale up their pickup stations across the country without any need to rent space.

[Photo: Walmart]

Groceries, optimized

King says the company is applying this same logic to groceries. For people who want to avoid the chaos of walking up and down the aisles of their local Walmart and instead want to pick up groceries on their way home from work, Walmart has built tech tools to enable it. Some Walmart employees called “personal shoppers” use an optimization app that charts out a pathway through the store so they can pick up all the groceries that people have ordered in the most efficient way possible. But they’re not just filling one shopping cart at a time; King says that each personal shopper could be fulfilling around eight different orders at once, each of which could have 50 to 100 items. The app routes the person through the store so that he or she has the shortest path to pick up every single ordered product. The optimization algorithm also plans the employee’s path so that they fill each bag first with harder items, like cans of soup, and put softer foods like bread and breakables like eggs on the top. “Think of [them] like mini warehouses,” King says. Then the employees meet customers in a designated pickup area and load their bags directly into their car trunk.

[Image: Walmart]

The stock problem

One problem with treating your store like a warehouse is that you’re probably going to run out of products faster. King talked about how one of Walmart’s never-ending challenges is that a product will be out of stock. Employees used to be charged with walking the aisles to spot out-of-stock items, but now Walmart is rolling out a robot that is designed to do just that. Equipped with cameras and a map of what’s supposed to be on the shelf, the robots stroll around hunting for missing items. If it finds one, it alerts a store employee to restock the item.

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There are now about 1,000 of these robots patrolling Walmart stores. They also integrate with an accordion-style conveyor belt that’s used to unload trucks in 400 Walmart locations. The conveyor belt automatically sorts all the boxes coming out of the truck into different departments. If the shelf-scanning robot notices that a product is out of stock, it can notify the conveyor belt robot, which will put any items that are out of stock into a priority queue so that people can put the items back on the shelf as soon as possible. It’s bringing the logistics and automation of a warehouse right to the store where people are shopping.

[Image: Walmart]
King says that Walmart plans to build support warehouses on the sides of some stores for what he called “high-velocity [grocery] items”–stuff that is always in demand. That could cut down on time for personal shopper employees who are collecting items for delivery or pickup. The employees could then head over to the store itself for items that consumers typically request less, like cooking utensils.

Will all of it be enough to beat Amazon? It’s too early to tell. But Walmart’s profits are surging. In 2018, its online sales grew 40%, and the company ended its fiscal year in January 2019 with $514.4 billion in revenue. By using technology to put the company’s colossal retail footprint to work for online deliveries and orders, Walmart is showing how tech can transform traditional retail into something of a hybrid.

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About the author

Katharine Schwab is an associate editor based in New York who covers technology, design, and culture. Email her at kschwab@fastcompany.com and follow her on Twitter @kschwabable

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