The Supply Side: Walmart bets big on artificial intelligence

Walmart is ushering in a new top executive group focused on transforming its retail operations with artificial intelligence (AI) to increase internal efficiency and capture an even bigger share of the market.

Outgoing CEO Doug McMillon has said he is confident incoming CEO John Furner can lead the company through an AI-driven transformation.

While Walmart is a retailer with more than 10,000 stores in 17 countries, e-commerce is seen as a growth engine. The company is betting on AI innovations to drive its goal of increasing online sales to 50% of total revenue within the next five years. Online sales comprised about 19% of total revenue in the previous fiscal year.

During a fireside chat at the National Retail Federation’s annual conference in New York City, Furner, who will take over as Walmart CEO on Feb. 1, said the retailer is willing to change just about anything to adapt.

“What won’t change … is our purpose, our values, the way we think about people leading,” Furner said. “But everything else we are willing to change – what we sell, how we interact with customers, with our associates.”

AI PARTNERSHIPS
He said retail was different from when he began his career 33 years ago.

“In 1993, there was a playbook on how it worked, and things seemed familiar at that time,” he said. “But, over the last few years we’ve been in a different period.”

He said Walmart is changing its retail playbook amid the broader AI adoption. Walmart has announced an AI strategy that focuses on four super agents, adding enabled purchases within ChatGPT, and more recently announcing a new partnership with Google’s Gemini.

Scott Benedict, a former Walmart executive and retail consultant, applauds Walmart’s investments and focus on AI, saying that too many retailers are falling behind the curve.

“The impetus of AI is what serves the consumer better and keeps prices low, which are core principles for Walmart,” Benedict said. “Customers are getting there faster than many thought based on recent holiday shopping data.”

He said Walmart has always embraced technology to improve its business operations dating back to satellite communications systems used by founder Sam Walton and David Glass in the 1980s.

“It’s smart for Walmart to partner with several top AI companies because no one knows which one will have the best results for specific tasks,” he said. “It’s important for Walmart to be in the fray with the top AI innovators to make business more efficient.”

TECHNOLOGY TINKERING
Daniel Danker, executive vice president of AI acceleration and product design at Walmart, recently spoke at the IRC Conference in Orlando, Fla., on the benefits of AI and the company’s strategy moving forward.

“For the last year or two, Walmart has been tinkering with AI, and this is the year where tinkering becomes transformation,” Danker said. “This is the year where we’ve built a level of mastery around that, and we’ll start building things that deeply address customer problems.”

He said Walmart is working with multiple AI partners because they expect to see continuous evolution in products and applications of the technology that can improve the shopping experience, which is Walmart-speak for encouraging shoppers to spend more. Danker expects to see repeat grocery purchases transitioning to a more automated model, with AI understanding how frequently to replenish items. He also foresees customers scrolling through AI-generated photos of themselves wearing clothes they are considering buying or asking AI for recommendations based on what’s already in their closet.

Danker said the latest advances in AI can do a good job of personalizing shopping. For instance, AI allows Walmart to understand which products a customer wants to splurge on and which they prefer value buys. He said advanced AI narrows a shopper’s search results and also makes suggestions to complement customer purchases.

“By the time you have the tomato paste and the ground beef and mozzarella, we’re pretty sure you’re making lasagna, and we don’t need you to search eight times and scroll through many, many pages just to add the basil and the tomato sauce and the ricotta,” Danker said. “Those experiences are going to become more human, more connected. They’ll understand your intent, and they’ll serve it up to you much more easily.”

SPARKY SUPPORT
Walmart last year unveiled Sparky, its customer AI agent, and continues to improve the service with prompts to remind customers of an auto appointment or a prescription ready for pickup. The app also recognizes if a shopper buys the same items weekly and suggests a new order in a timely manner.

“Today, Sparky is doing a number of things really well for customers,” Danker said. “If you can’t find your order or if you need to return something or if something was broken, Sparky works great at helping customers get the information they need through the chat interface. As of last month, Sparky can wake up on its own and just say, hey, you open the app and it notices that you tend to buy many of the same items week over week. It can prompt you to buy the same items on the next order. It’s early days, but it’s off to a pretty good start.”

Danker believes the Sparky chat interface and Walmart’s traditional search bar will collapse into one search system. But for now, the two exist separately.

“It’s not going to happen overnight,” he said. “It’s also not going to happen all at once, but I do think this is a year where we will be delivering transformative experiences in commerce. So you will definitely look back a year from now and say, ‘Gosh, that’s quite different than how I used to use Walmart. That’s quite different than the expectations I used to bring when I opened an app.’”

He is most excited about the potential for Walmart when shoppers or users ask ChatGPT and Gemini questions that aren’t directly related to shopping.

Customers who are unsure of their needs may ask these services about what type of TV would fit in their space, how to get that wine stain out or how to handle a new challenge that’s emerged with their newborn baby. Danker said those are questions that may not start with the intent to purchase but could end up that way if Walmart shows up in the answers.

SUPPLY CHAIN SUPPORT
Internally, Walmart has deployed AI and robotics to help with the movement of goods.

“If we can predict which products are going to be needed in which stores or to which customers early, then we can push those products down through the supply chain, so that by the time the customer is placing an order, it seems impossibly fast,” Danker said. “How is it possible that Walmart had that item so close to me at that moment? It’s because we use technology and AI to anticipate that long before the customer even places the order, and … it’s easy to focus on what the Walmart app will do with the customer in that moment.”

He said it’s possible because AI is used throughout the supply chain.

“AI really needs to have purpose,” he said. “And our entire strategy and plan with AI is built with a purpose that needs to be extremely practical. The technology is complicated. The technology is incredible. I would also argue that we’ve just barely scratched the surface on personalization, and AI is going to take us to a new place there.”

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics, and is sponsored by HRG.