John James: Wal-Mart took too long to seek an e-commerce advantage using its physical size

The Walmart U.S. grocery pickup service arrived a dozen years too late and cost the retailer its advantage, John James told entrepreneurs at Thursday’s (Oct. 5) CPG Innovators Conference in Bentonville.

“I think the writing is on the wall,” said James, founder of Acumen Brands and its consumer-direct sales superstar Country Outfitter. “Amazon switched to ‘for’ internet sales tax, and that shows me Amazon is going to build a warehouse in every state. They’re building a Fedex/UPS competitor, and I don’t know what Walmart can do; their tremendous lead is getting smaller everyday.”

James conceded that Wal-Mart’s recent $3.3 billion acquisition of Jet.com was “either the best or worst purchase ever made, and I personally think it was best. But Walmart has taken far too long to use their 3,800 stores as an advantage.”

To the gathering of entrepreneurs and Walmart suppliers, meeting less than two miles from headquarters of the giant retailer, James joked, “I just lost all my friends,” based on his admission.

“There’s something visceral about the experience I have with Amazon. I’ve been a Prime member since the day it came out. Everything shows up on my doorstep, and I think that’s where we’re headed,” James said.

The Jet.com deal closed Sept. 19 and included bringing Jet CEO Marc Lore into the Wal-Mart management team. Lore joins Walmart’s leadership team, serving as executive vice president at Walmart and president and CEO of Walmart eCommerce in the U.S. He will lead Walmart.com and Jet.com, and report to Wal-Mart Stores CEO Doug McMillon.

A self-proclaimed “tech geek ex-doctor,” James launched his first ecommerce venture from a University of Arkansas dorm room in 1993, easily financing medical school with the earnings. In 2009, he and a partner launched Acumen Brands and raised $104 million in venture capital with a disruptive strategy of bypassing retailers and mining customers directly via Google and Facebook.

A retailer today is essentially a “dumb pipe,” James said.

“Consumer loyalty is in the brand, not the retailer. People don’t care where they buy stuff, as long as it shows up with a good experience and good price.”

Emerging brands will continue to disrupt giants, James predicted, as with Dollar Shave Club (recently acquired by Unilever for $1 billion) and the Honest Company. Both relied upon bite-sized content to fuse direct lines of communication with consumers. James said he met in Los Angeles with founders of both companies and turned down a job offer from Jessica Alba.

“You’re going to see a lot more of these brands coming up,” he said. “Disruption comes from outside an industry and kills all the sacred cows.”

James’ remarks were part of the fifth CPG Innovators Conference, presented by Supplier Community in conjunction with Startup Junkie Consulting.