WalmartLabs could be game-changer for retail giant

The big box retail titan Walmart has surprised analysts in recent months with a fresh new approach to global growth strategies blazing a trail toward the next generation of shoppers.

WalmartLabs, based in the heart of Silicon Valley, is the wild card which elevated the stakes for the traditional brick and mortar giant in recent months.

Walmart acquired Kosmix for its social media genome capabilities in April 2011 for a reported $300 million. It was the first of five tech acquisitions Walmart has made in recent months. WalmartLabs employs roughly 200 technology specialists in its San Bruno, Calif. hub.

More recently WalmartLabs India came on board with a satellite office of its own some 13 time zones away in Bangalore.

WalmartLabs said in November its facility in Bangalore was recruiting a roster of roughly 100 developers who have deep knowledge and expertise in the areas of machine learning, social analytics and big data infrastructure. The team will lead and own projects to bring new e-commerce, social and mobile commerce offerings to the global marketplace.

Carol Spieckerman, president of Newmarketbuilders, says Walmart has set a frenetic pace which is pushing the envelope forward in a fast way for a company that has typically followed an insular and “grow your own” mindset.

RISING ABOVE MEDIOCRITY
Walmart has had mediocre success with its online efforts thus far, but times are changing, according to analysts and Walmart executives. Spieckerman said Walmart is not one to easily surrender, and has played an impressive game of catch-up over the past year.

She applauds Walmart for creating a separate entity — or tech satellite offices that specialize in gathering and sorting social media data which can be used to create mobile applications to enhance shopping experience as well as provide insight to merchandisers on what brands and products to put on store shelves.

Spieckerman said retailers too often will try to incorporate the Internet with their traditional merchant culture, but the two rarely work the same.

Wal-Mart Stores’ CEO Mike Duke recently shared his excitement about WalmartLabs as the keynote speaker at the Rogers Chamber of Commerce annual banquet.

“The very best days for Walmart associates and customers are ahead of us,” Duke said as he talked about the company’s recent investments in technology and its new WalmartLabs division.

Duke said the recent acquisitions are helping Walmart build a “world-class technology team” that will help the company fully understand how customers are using mobile technology while leveraging that data to provide better service across the globe.

DISRUPTIVE ELEMENTS
WalmartLabs senior executive Anand Rajaraman last year pointed to three disruptive elements forcing traditional retailers to step-up their e-commerce game: Facebook, Twitter and smart phones.

In 2011, there were more smart phones sold than feature phones for first time ever and 800 million consumers use Facebook and or, Twitter regularly. Facebook users are expected to top 1 billion by the end of this year.

Nielsen estimates that 46% of U.S. mobile phone users have smartphone devices. Digital marketing firm IDC reports there were 491.4 million smart phones sold last year throughout the world.

NEW GAME PLAN
Dave Marcotte, international analyst for Kantar Retail, said WalmartLabs is actively applying a “try everything” approach in a broad effort to see what works and what doesn’t in many different markets – from the U.S. to Argentina to the U.K. and more recently in China.

He said Walmart’s tech buying spree in 2011 is a bold statement of the company’s serious intentions to elevate its ranks among the leading online retailers.

Stewart Samuel, senior analyst with IGD , agrees e-commerce is an area that Walmart is aiming to lead on a global scale.

Samuel said the recent acquisitions have allowed the retailer to significantly increase its capability in terms of both mobile and social commerce.

”While this has started to deliver new initiatives, such as iPhone apps and its Shopycat app for Facebook, we can expect to see much more experimentation in these areas,” Samuel said.

Analysts recently asked Walmart to talk candidly about its WalmartLabs division. One common question was how will Walmart compete with Amazon on price and product availability?

Walmart answered that both it and Sam’s Club are making strides to better compete with Amazon by offering superior mobile experiences that fully engage the shopper at the point of purchase. Some of the benefits include: virtual coupon tie-ins and voice search. Sam's Club is using eValue loyalty targeting and online member reviews.

One goal Walmart hopes to reach in the near term is “omnichannel retailing” which is described as a smart blend of online purchases and in-store purchases happening during the same transaction in the middle of physical store locations.

Analysts say Walmart is testing concept stores in California where people can buy online. They say the concept that allows shoppers the ability to purchase untouchable inventory in a virtual location is here-to-stay.

MEANINGFUL IMPACT
While the “omnichannel” concept is here analysts say it’s still likely a good way from any meaningful gains to the company’s total overall sales – $443.9 billion in fiscal 2012.

Wal-Mart Stores does not break out its online sales, but RetailNet Group estimates they range between 1.5% and 3% of the company’s total sales with ample room for growth.

Experian Hitwise reports last year 28% of consumers performed shopping activities from their phone within brick-and-mortar retail stores

Spieckerman sees big potential in Walmart’s efforts to switch gears from being somewhat obsessed a couple of years ago with physical store appearance to blazing a new trail which leverages their massive scale to reach more customers via technology.

She said it’s not likely a coincidence that Walmart shaved 10% from its advertising budget last year and still managed to reach more consumers during the holiday shopping season.

“Walmart’s alliances with Facebook, its steady stream of tech acquisitions and the digital magic that it’s been cooking up at WalmartLabs certainly point to digital as a driver of the (advertising) decrease,” Spieckerman notes in a recent blog.

Walmart has admitted the return of lay-away was an idea generated from mining social media sites from its improved technology division.