Expert discusses Wal-Mart’s recent shopping spree, says retailer may be building a ‘Frankenstein’

Annibal Sodero, assistant professor of supply chain management at the University of Arkansas, said Wal-Mart’s $70 million acquisition of ShoeBuy looks good on paper, but he doesn’t understand a strategy that seems to move the retailer away from its core business.

“I applaud them for wanting to become more of a technology company, but I have to wonder what are they doing with an online vertical shoe/apparel business in a market dominated by Zappos. Through Jet they also now have Hayneedle, an online home furnishings business, again another e-commerce vertical that is not core to their own business,” said Sodero, who added that as a computer scientist and former logistics entrepreneur he struggles to follow the logic of such vertical moves.

He said a central message from the retail giant has been about simplification, but from the recent shopping spree it looks as if the business is getting more complicated.

“Do they plan to integrate these businesses, if so, it won’t be an easy task. Geographically there are challenges, culturally there are challenges and the business models themselves are fundamentally different. It is true Wal-Mart will need to grow its expertise and market share through acquisition to catch up to Amazon and Alibaba, but the recent deals don’t really add to market share. In fact it looks kind of like Wal-Mart is building a Frankenstein,” Sodero said.

He acknowledged that Wal-Mart wants to become more like a technology company, given its biggest competitor Amazon is a technology company. He said Amazon’s ability to create solutions it sees for future retail challenges is a big advantage. He credits Wal-Mart with doing a respectable job in building its tech shop in San Bruno, Calif., but said recruiting and retaining the top talent is a challenge even for Wal-Mart because Google, Apple and a dozen other tech giants are vying for the same talent.

“It will be interesting to see what Marc Lore (CEO of Jet.com, and now CEO of Wal-Mart Global eCommerce) can accomplish in the roughly 4.5 years that he remains under contract with Wal-Mart. The clock is already ticking down,” Sodero said.

He said Lore is the main reason Wal-Mart acquired Jet, but five years can seem like a lifetime for an entrepreneur to work for a giant corporation.

The Business Insider recently reported that Wal-Mart could be poised for a digital shopping spree as it seeks to grow its online sales globally. Wal-Mart CEO Doug McMillon has said the basket economics built into Jet’s operations were what attracted him to the deal. McMillon loved the Jet basket feature that allows customers to control the pricing based on delivery options and the number of items purchased.

Analysts have wondered just how that will would work at Wal-Mart given that suppliers are already giving the retailer the lowest possible price. Slice Intelligence reports that Jet, even with that service, still struggles to get repeat customers.

Sodero said there are other startup technology companies that might make more sense as acquisitions for Wal-Mart, more so than another vertical e-commerce business. He wonders if Wal-Mart will harken back to the early years of WalmartLabs when true tech companies were the target acquisitions.

Under the leadership of then Wal-Mart Global eCommerce CEO Neil Ashe, the retailer made several acquisitions of small startups such as Kosmix for its social media genome capabilities. Grabble, whose technology scans receipts and keeps a database of a buyer’s purchase history was also acquired in 2012. The next year Wal-Mart acquired OneOps to help the retailer accelerate private cloud infrastructure strategies. Software developer Tasty Labs was also acquired at the same time. In 2014 Wal-Mart acquired Adchemy, a product search startup, and Sylir, a fashion finding app that helps consumers find clothes they like in nearby stores and then flip through the racks via their phone app.

Ashe said many of the earlier acquisitions were about getting the tech talent to put their efforts to work solving challenges for Walmart’s e-commerce business. Some analysts suggest Wal-Mart and the rest of brick and mortar retailers must invest heavily in infrastructure and talent if they want to be around in the next five years. Macy’s, JC Penney, Kohl’s, Sears and Wal-Mart have all recently confirmed they are reducing store count in order to invest more into online operations. Nordstrom and Home Depot are also planning to allocate more of their capital expenditures to growing online.

Sodero, a native of Brazil, has lived in the United Kingdom as well as South America for extended times. He said the United States is woefully behind in how retailers are integrating technology into shopping and every other aspect of life.

“In the UK the trashcans talk to you when you pass by. They can also scan your credit cards in the wallet and read your driver’s license and call you by name. Grocery retailers have been delivering groceries bought online for nearly 20 years there. Augmented reality was used by Tesco … two years ago in South Korea to sell groceries in a busy train station,” Sodero said. “The technology is available to shift a majority of retail online in the next few years. Retailers like Wal-Mart know this and they are trying hard to turn their massive ship.”