Wal-Mart, Google Express partnership praised by most retail analysts, but risks exist

Wal-Mart Stores is partnering with Google to offer consumers the option to buy Wal-Mart items using their voice via Google Assistant. Walmart U.S. e Commerce CEO Marc Lore announced the Google partnership in a blog post late Tuesday (Aug. 22).

Lore said the new voice activated ordering capabilities will be available to Wal-Mart customers in September. He said the deal with Google will make shopping easier and will be the largest number of items offered by a retailer through the voice-activated platform.

“One of the primary use cases for voice shopping will be the ability to build a basket of previously purchased everyday essentials. That’s why we decided to deeply integrate our Easy Reorder feature into Google Express. This will enable us to deliver highly personalized shopping recommendations based on customers’ previous purchases, including those made in Walmart stores and on Walmart.com,” Lore noted in the blog.

Wal-Mart is the first retail partner with Google to allow consumers to link their former purchase history to the Google platform. This allows a customer using the service to merely say “order coffee” and not have to specifically tell the device exactly what kind and size of packaging they want. Because the Google assistant will have the shopper’s recent order history it will know what kind of coffee that customer is wanting.

There are other retailers partnering with Google Express from Toys “R” Us to Costco and even MooseJaw, but none offer the order history piece that the new Wal-Mart deal makes available.

Lore said using artificial intelligence like voice activated shopping assistants is another way Wal-Mart can help customers save time shopping. He said Wal-Mart partnered with Google because the tech giant made significant investments in natural language processing and artificial intelligence to deliver a powerful voice shopping experience.

“We know this means being compared side-by-side with other retailers, and we think that’s the way it should be. An open and transparent shopping universe is good for customers,” Lore added. “One day as the experience improves and as artificial intelligence continues to get better, I do see this as being a primary way for consumers to shop under certain conditions.”

Next year Lore said the retailer will leverage its 4,700 U.S. stores and its fulfillment network to create customer experiences that don’t exist within voice shopping anywhere else including choosing to pick up an order in store and get the pickup discount, or using voice shopping to purchase fresh groceries across the country.

GOOGLE HOME VS ALEXA
Retail insiders and analysts said the move by Wal-Mart is a direct response to Amazon Echo and shopping assistant Alexa, but that Amazon still has an advantage.

“This partnership with Google accelerates Wal-Mart’s rollout of voice commerce by giving it immediate access to an installed base of Google Home device owners and sparing Wal-Mart the investment of time and capital to build its own voice search and commerce capabilities,” said Keith Anderson, senior vice president of strategy at Boston-based Profitero.

Anderson said Google Home adoption still lags Alexa-enabled devices sold by Amazon, but it continues to grow. A recent survey by Morning Consult indicated 18.8 million Amazon Echo devices were sold through June compared with 15.7 million Google Home devices. There was an overlap of 4.7 million people who own both devices which puts the total users of voice assistant devices at about 29.8 million.

“Estimates I’ve seen peg Google Home adoption at 1-6 million devices and Alexa-enabled device sales at between 12-20 million (though last month’s Prime Day likely led to another huge spike,” Anderson said. “Google Home is often praised for being able to handle a more diverse set of commands and queries, but Amazon & Alexa win handily on voice commerce. A tighter integration of Google Home and Google Express might put Google (and by association, Walmart) on more even footing, but Alexa still enjoys much more developer support, integration with the Amazon mobile app and Fire TV devices, and the lock-in effect of Amazon Prime membership.”

WALL STREET APPROVAL
Charles Grom, a retail analyst with Gordon Haskett Research, said the move is an intelligent and natural joint venture because Amazon’s Alexa is more or less closed off to other retailers.

“From Wal-Mart’s vantage point, the relationship appears to be a win/win and builds upon many of its recent digital ecosystem initiatives. … All told we like the move and see it as another forward-thinking strategic decision from the team in Bentonville,” Grom said.

He also said Google is eliminating the $95 annual fee for its Google Express shopping service. Instead, consumers who place orders with Google Home won’t pay a fee as long as they surpass Wal-Mart’s free-shipping threshold ($35).

Budd Bugatch, a retail analyst with Raymond James & Associates, also likes the Wal-Mart and Google partnership. Bugatch said voice-activated shopping could eventually replace mobile and it’s smart for Wal-Mart to have a strategy in place. He doesn’t see the move as a threat to Alexa, but he said Wal-Mart is innovating in ways Amazon can’t, such as in-store pickup and the online order discount for general merchandise when it’s picked up in stores. He said testing employees to deliver online orders from stores still has hurdles but is also an innovative move by Wal-Mart that Amazon can’t now answer.

TRADE-OFFS, RISKS
Anderson said Wal-Mart’s decision to partner instead of building or buying comes with trade-offs, like losing control over Google’s roadmap, limited (or shared) access to customer data, control of the customer experience and uncertainty about the long-term cost of supporting voice commerce.

“It’s notable to me, for example, that Google Home shoppers will be completing purchases via the Google Express app, not Walmart’s app. Ultimately it’s a step forward for Wal-Mart. But I wonder if this may not be the first of many steps. I’ve been told that Wal-Mart’s Store No. 8 tech incubator has a voice play, and I think over the long-term retailers will want proprietary or white-label voice commerce capabilities so that they maintain more control over customers’ experience and data,” Anderson said.

Annibal Sodero, assistant professor of supply chain at the University of Arkansas, said there are definite trade-offs in the partnership with respect to Wal-Mart sharing data with Google. Be said Wal-Mart needs to make up some ground and partnering with a leader like Google gives them a big leap.

But, he warns longer-term that Wal-Mart’s sharing data with Google could be costly should Google become well acquainted with Wal-Mart’s customers’ preferences. He said Google’s mission as one of the top five technology companies is to grow its information base on every household and every person in the world. For example, Sodero proposed, what’s to keep Google from using Wal-Mart shopper information in its own Google Express shopping platform, which includes 30 retailers in the Northwest Arkansas market.