Wal­mart goes to the cloud to close gap with Ama­zon

Kuwait Times - - Business -

SAN BRUNO/SUN­NY­VALE, Calif: One of Wal­mart Inc’s best chances at tak­ing on Ama­zon.com Inc in e-com­merce lies with six gi­ant server farms, each larger than ten foot­ball fields.

These fa­cil­i­ties, which cost Wal­mart mil­lions of dol­lars and took nearly five years to build, are start­ing to pay off. The re­tailer’s on­line sales have been on a tear for the last three con­sec­u­tive quar­ters, far out­pac­ing wider in­dus­try growth lev­els. Pow­er­ing that rise are thou­sands of pro­pri­etary servers that en­able the com­pany to crunch al­most lim­it­less swathes of cus­tomer data in-house.

Most re­tail­ers rent the com­put­ing ca­pac­ity they need to store and man­age such in­for­ma­tion. But Wal­mart’s de­ci­sion to build its own in­ter­nal cloud net­work shows its de­ter­mi­na­tion to grab a big­ger slice of on­line shop­ping, in part by im­i­tat­ing Ama­zon’s use of cloud-pow­ered big data to drive dig­i­tal sales.

The effort is help­ing Wal­mart to stay com­pet­i­tive with Ama­zon on pric­ing and to tightly con­trol key func­tions such as in­ven­tory. And it is al­low­ing the com­pany to tar­get shop­pers with more cus­tom­ized of­fers and im­proved ser­vices, two top ex­ec­u­tives told Reuters in in­ter­views at Wal­mart’s San Bruno and Sun­ny­vale cam­puses in Cal­i­for­nia. “It has made a big dif­fer­ence to how fast we can grow our e-com­merce busi­ness,” said Tim Kim­met, head of cloud op­er­a­tions for Wal­mart.

He said Wal­mart, for ex­am­ple, is using cloud data to stock items fre­quently or­dered by cus­tomers via voice shop­ping de­vices such as Google Home.

The net­work is help­ing the re­tailer im­prove its in-store op­er­a­tions as well. Using data gleaned from mil­lions of trans­ac­tions, the com­pany sped up the process by which cus­tomers can re­turn on­line pur­chases to their lo­cal stores by 60 per­cent. And Wal­mart can ad­just prices at its phys­i­cal lo­ca­tions al­most in­stantly across en­tire re­gions. “We are now able to ex­e­cute change faster,” Jeremy King, Wal­mart’s chief tech­nol­ogy of­fi­cer, told Reuters. He added that Wal­mart can now make over 170,000 monthly changes to soft­ware that sup­ports its web­site, com­pared to less than 100 changes pre­vi­ously.

To be sure, Wal­mart, the world’s largest brick-and-mor­tar re­tailer, holds just a 3.6 per­cent share of the US e-com­merce mar­ket com­pared to Ama­zon’s 43.5 per­cent, ac­cord­ing to dig­i­tal re­search firm eMar­keter.

Still, Wal­mart’s cloud effort is sig­nif­i­cant at a time when US re­tail is un­der­go­ing im­mense dis­rup­tion, and data-based de­ci­sion mak­ing has be­come more im­por­tant than ever to un­der­stand how shop­pers make pur­chases. Wal­mart’s on­line rev­enue climbed 50 per­cent year-over-year dur­ing the third quar­ter, help­ing it post its strong­est-ever quar­terly growth since 2009.

“The bat­tle be­tween Wal­mart and Ama­zon has been play­ing out on all fronts and the cloud is the lat­est fron­tier,” said Kerry Liu, chief ex­ec­u­tive of Ru­bik­loud Tech­nolo­gies, which of­fers ar­ti­fi­cial in­tel­li­gence tech­nol­ogy ser­vices to re­tail­ers.

Ex­cess ca­pac­ity

The cloud ini­tia­tive is but one of sev­eral steps Wal-Mart is tak­ing to boost its e-com­merce busi­ness. The com­pany has ex­panded its on­line se­lec­tion and ac­quired smaller ecom­merce re­tail­ers. Wal­mart is of­fer­ing free two-day ship­ping on or­ders of $35 or more, and it re­cently asked ven­dors to sup­ply it with mer­chan­dise priced at $10 and up to help it turn a profit on­line.

Wal­mart has stored in­for­ma­tion in smaller in­ter­nal data cen­ters for years. And it uses pub­lic cloud stor­age for non-crit­i­cal data. Most re­tail­ers rent server ca­pac­ity of­fered by com­pa­nies such as Ama­zon Web Ser­vices, Al­pha­bet Inc’s Google , Mi­crosoft Corp and IBM.

But Wal­mart’s de­ci­sion to build a net­work that is not re­liant on a sin­gle third-party cloud tech­nol­ogy provider has trans­formed its abil­ity to un­der­stand shop­pers, who now move be­tween store, desk­top, mo­bile and app to make pur­chases. About 80 per­cent of Wal­mart’s cloud net­work is now in-house. Wal­mart’s Kim­met said se­cu­rity was an­other big fac­tor be­hind the effort, en­abling the re­tailer to better pro­tect cus­tomer data. That se­crecy ex­tends to the lo­ca­tions of its six “mega clouds” or gi­ant server farms, and 75 “mi­cro clouds” whose lo­ca­tions the com­pany de­clined to dis­close pub­licly.

Wal­mart share­hold­ers so far ap­pear sup­port­ive of its cloud strat­egy. The com­pany’s shares have risen 49 per­cent in the last 12 months, de­fy­ing the broader re­tail sec­tor down­turn and out­per­form­ing the wider S&P 500 in­dex, which has risen 14 per­cent over the same pe­riod.

Still, some in­vestors have ex­pressed con­cerns that Wal­mart’s ap­proach will make it harder for the re­tailer to down­size if mar­ket con­di­tions change sig­nif­i­cantly. A few of them told Reuters they would like to see Wal­mart com­mer­cial­ize its ex­cess ca­pac­ity, much as its ri­val Ama­zon has done. Ama­zon Web Ser­vices (AWS) gen­er­ated $18.34 bil­lion in rev­enue in 2017 and has gar­nered 26 per­cent of the cloud mar­ket, ac­cord­ing to es­ti­mates from Jef­feries Group LLC. —

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.