The Supply Side: IGD names Walmart’s top 5 tech innovations in 2022

by Kim Souza ([email protected]) 2,183 views 

Besides being the nation’s largest retailer, Walmart is slowly becoming a technology company.

The Bentonville-based retail titan spent big on technology innovations last year in hopes of adding additional revenue streams, curbing last-mile costs and tackling labor challenges.

A recent report from IGD research analyst Stewart Samuel looked at Walmart’s top five technology investments in 2022, including metaverse, micro-fulfillment, social commerce, drone automation and video streaming as a loyalty play for Walmart+ members.

While the metaverse remains a somewhat elusive concept for many consumers, Walmart chose to test the waters in 2022 with two different experiences on Roblox — Walmart Land and Walmart’s Universe of Play.

Samuel said the opportunity for grocery retailers with the metaverse is unclear, but it’s great to see retailers and brands testing solutions across various platforms.

“The merging of physical and digital shopping to create a more immersive online experience, leveraging many of the technologies which underpin the metaverse, is where I expect it to be more relevant for grocers,” he said. “But the blending of virtual worlds and physical on-demand delivery is an exciting intersection to be explored.”

He said Walmart launched on the fast-growing Roblox platform, and with more than 52 million users, it has become a place where users can interact with friends, shop or watch a concert. Samuel said the metaverse is akin to a gold rush, with retailers and brands investing and experimenting across various platforms. He said the early movers in the space could build a competitive advantage should the metaverse become the next evolution of the internet.

In 2021, Walmart announced plans to build several dozen micro-fulfillment centers adjacent to Supercenters that would increase the speed of order filling for online grocery and general merchandise orders for delivery and store pickup.

Walmart was testing the concept with the help of multiple tech partners until late 2022, when the retailer acquired Alert Innovation, with whom it had worked since 2016. Samuel said Walmart is the first retailer to invest directly in this fulfillment technology.

“This enables it to ramp up its plans for store-based fulfillment and signal to other operators that the technology is an important part of solving the e-commerce profitability challenge,” he said. “From Walmart’s perspective, it also locks out competing retailers from Alert’s solution. At the same time, in the long-term, it could be a technology that it commercializes through Walmart Commerce Technologies.”

Samuel said the acquisition of Alert validates micro-fulfillment as a scalable solution. Walmart can quickly fulfill orders while eliminating order pickers from the in-store environment. Automation will be essential in solving the online business profitability challenge and should be more accretive to the retailer’s net income.

Samuel said that while various companies operate similar systems, there are distinct differences with the Alphabot by Alert, which uses fully autonomous bots. They store, retrieve and dispense orders by moving horizontally, laterally and vertically across three temperature zones without lifts or conveyors. That provides fewer space constraints inside the micro-fulfillment center and eliminates the need to pause the entire system for maintenance.

Samuel said the pandemic slowed the roll-out of automated micro-fulfillment centers. He said retailers had to add capacity for manual picking during the pandemic with the surge of online shopping. That demand remained high in 2022, but retailers began to refine operations, focusing on execution and shopper experience, he added.

Samuel believes the conditions are right for expansion in 2023. He said online grocery demand has returned to a more stable and predictable growth trajectory. He said profitability and business costs are under more pressure, and the challenge with labor availability leads to more retail automation.

Last year, Walmart launched several new social commerce programs, including the Walmart Creator platform that enables influencers to monetize products from the retailer by creating and engaging in video-based content. Samuel said Walmart democratized access to all who want to create and refer products to their followers.

The retailer said a Walmart Creator platform was already established on TikTok in November. The platform was initially launched in beta mode for the holidays before a fuller launch this year. Walmart said it plans to continue to develop the platform and provide tools to support its creators. At launch, creators receive product recommendations based on interests and affinities and have access to performance data to help grow their community and following. The platform will allow users to learn from top creators across every category.

Samuel said the launch of this platform came as Walmart ramped up its social commerce activities last year. The retailer has hosted around 20 livestream shopping events across various platforms, including Twitter, YouTube and TikTok. Walmart also announced a series of social commerce Innovation Partners to expand its reach and test new models. Working with its Walmart Connect media business, these will enable advertisers to reach shoppers on mobile, social, video, connected TV and live streaming platforms, Samuel added.

Samuel said Walmart is taking membership and loyalty in a new direction by adding video streaming through a partnership with Paramount announced in 2022. He said Walmart also launched a rewards program with Ibotta that provides cash savings for members as the retailer seeks to try and differentiate itself from other retailers.

Samuel said Walmart+ is evolving into a credible membership proposition from the e-commerce delivery perk to a more value-oriented proposition with the streaming benefits and the rewards programs with the Ibotta partnership.

He said Walmart is taking on Amazon Prime with a different digital ecosystem. While Walmart is not in a position to provide original video content for streaming, the retailer is moving in the right direction to broaden the appeal of its membership to a broad audience.

“This is especially important given that some consumers will cut back on their subscription services given the inflationary backdrop and the budgetary pressures this creates,” Samuel added.

Walmart has been one of the leading retailers testing drone deliveries for several years. Still, its recently expanded partnership with DroneUp enables it to reach 4 million households in six U.S. states. Walmart said it could deliver more than 1 million packages annually via drone.

Samuel said what’s different about Walmart’s drone initiative is its ability to monetize the infrastructure. He said Walmart is now looking to offer local businesses aerial drone solutions in areas like insurance, emergency response and real estate. He said that this additional revenue stream would help offset the cost of delivery and support efforts to gather more flight data.

“This approach is in line with Walmart’s broader strategy to monetize its capabilities, having launched Data Ventures, GoLocal and Walmart Fulfillment Services similarly. These sit alongside businesses such as Walmart Connect, Walmart Health and Walmart+. While they are all at different stages of development, they have the potential to grow into operations of significant scale,” Samuel noted.