Analysis: Walmart should focus on its customers to succeed, not try to copy Amazon
Walmart made sweeping changes to its e-commerce organization for the second time since it acquired online retailer Jet.com and appointed company founder Marc Lore as head of its own e-commerce division. The latest move, announced in a memo to Walmart associates on Jan. 13, further consolidates the retail giant’s online properties, and strengthens Lore’s influence on the chain’s digital strategy as it faces-off with Amazon.
In November, the company revealed several management changes in the e-commerce division, including at least three high-ranking departures. This month’s announcement focuses more on the integration of operations, technology, marketing and sales across all its web properties, signaling clear validation of Lore's role at Walmart, and Walmart management’s satisfaction with his progress to date.
The memo unveils a new structure, which it says integrates and builds on the division’s collective assortment and site experience capabilities, including shared buying, item set-up, pricing, analytics and website management responsibilities.
The change represent a significant evolution of Walmart's e-commerce and online go-to-market strategy. And, as far as it goes, makes perfect sense. The question is does it go far enough?
NEW STRATEGY
Scott Hilton, who also came on board with the Jet.com acquisition, has been promoted to senior VP and chief revenue officer for e-commerce. In this role, he will lead the new, single organization that brings together Walmart.com, Jet.com, Hayneedle.com and other sites.
Walmart has also brought together its previously disparate e-commerce technology groups under Jeremy King, former head of WalmartLabs, who has been promoted to executive VP and chief technology officer. The integrated technology team will be tasked with creating a seamless experiences for Walmart’s customers – whether they shop in-store, through the app or online, the memo says.
Unifying all digital properties and operations (retail, technology and product) will allow for greater operational efficiency, increased buying power, a more effective supply chain, improved customer service, and greater consistency in customer experience. But, competing with Amazon will require more than just greater efficiencies. To this end Walmart is creating an Incubation and Strategic Partnerships group, to focus on identifying and incubating new ideas in the digital entertainment and internet of things (IoT) space.
The incubation group includes the so-called VUDU team, which delivers high definition entertainment streaming services. VUDU had been operating in its own silo up to now. Being part of a larger group should help to mainstream its innovative work into the core product. Digital entertainment and IoT represent major growth areas in retail right now – just look at what’s happening with Netflix, and Amazon Video, Echo and Dash, for example.
However, one cannot help but notice that, save for centralizing marketing for all properties digital and non, under joint leadership of .com and in-store, Walmart is still keeping e-commerce at arm’s length, treating it as its own corporation.
Combining marketing is a positive move that can drive a customer-centric approach, which is truly the only way as an omnichannel retailer Walmart can ensure relevance and consistency in how shoppers experience its brand.
On the other hand keeping e-commerce retail separate from in-store retail, for example, almost guarantees continued conflicts between Walmart buying teams as they compete for manufacturer trade funding. Supply chain and inventory is another area where Walmart falls down in-store. This in turn limits their buy online / pick up in store capabilities, at a time when click and collect is growing in popularity with consumers.
In building a large e-commerce division, separate from its main in-store business, to compete with Amazon, Walmart is somewhat missing the point. Competing directly with Amazon, on Amazon’s terms is a fool’s errand.
Walmart’s shareholders have very different quarterly expectations to Amazon’s, and as such, Walmart will never be able to invest in e-commerce to the same relative depth as the online leader. Despite the best efforts of Marc Lore and his team, it is always going to be on the back-foot.
Further, its core value proposition of “Every Day Low Prices” probably isn’t sustainable online, as technology enables Amazon and others price match – every day. Walmart will need to reinvent what “Every Day Low Prices” means to online shoppers, rethinking mechanics for delivering on the promise. This is a critical area where Jet.com can help, having had some success building a price model that delivers below Amazon's prices.
Ultimately Walmart’s best path to success is to play to its existing strengths, by layering its e-commerce and technology capabilities on top of its distribution and physical store infrastructure – from product education, to closing the sale – to reach the shopper where, when and how she wants.