Wal­mart goes to the cloud to bat­tle Ama­zon

Wants big­ger slice of on­line shop­ping

Bangkok Post - - BUSINESS - NANDITA BOSE

SAN BRUNO/SUNNYVALE, CAL­I­FOR­NIA: 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 cus­tomised 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%. 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 could 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% share of the US e-com­merce mar­ket com­pared to Ama­zon’s 43.5%, 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.

“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.

The cloud ini­tia­tive is but one of sev­eral steps Wal­mart is tak­ing to boost its e-com­merce busi­ness. The com­pany has ex­panded its on­line se­lec­tion and ac­quired smaller e-com­merce 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 cen­tres 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 Corp.

But Wal­mart’s de­ci­sion to build a net­work that is not re­liant on a sin­gle third­party cloud tech­nol­ogy provider has trans­formed its abil­ity to un­der­stand shop­pers, who now move be­tween store, desk­top, mo­bile and app to make pur­chases.

About 80% 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% in the last 12 months, de­fy­ing the broader re­tail sec­tor down­turn and out­per­form­ing the wider S&P 500 in­dex, which has risen 14% 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 com­mer­cialise 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% of the cloud mar­ket, ac­cord­ing to es­ti­mates from Jefferies Group LLC.

REUTERS

Wal­mart em­ploy­ees work at the com­pany’s net­work op­er­a­tions cen­tre in Sunnyvale, Cal­i­for­nia.

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