Wal-Mart steps up e-commerce drive

Store No. 8 to hatch new online businesses

SAN FRANCISCO: The purchase of Jet, an upstart e-commerce venture, for $3.3 billion last summer was meant to give WalMart Stores Inc, the largest retailer in the United States, a way to transform its online retail strategy.

Now Wal-Mart is expanding its e-commerce ambitions, and it has tapped a Jet executive to help it build new start-ups within the company.

Wal-Mart announced on Monday that it had formed Store No. 8, an internal venture meant to hatch new online retail businesses.

It is the latest sign that Wal-Mart is trying to revamp its e-commerce playbook. That effort began in earnest last year, with the acquisition of Jet. And last week, Wal-Mart struck a deal to buy ModCloth, an online purveyor of trendy women’s clothing.

Behind the strategic shift has been a recognition that Wal-Mart, long dominant in the world of physical retailing, has fallen far behind in the business of selling goods online — and particularly far behind Amazon.com Inc.

Jet had ambitions of becoming Amazon’s most formidable rival at a time when few credible challengers had emerged. But Jet failed to achieve profitability or emerge as a robust competitor.

Many big companies have internal venture arms. And Wal-Mart already has an internal research lab, @walmartlabs, that has focused on developing new e-commerce applications for the retailer.

But Store No. 8 is the first incubator or investment arm of its kind at Wal-Mart, which has a market value of $213 billion.

The new venture takes its name from an early Wal-Mart store, built in an old bottling plant, that the company founder Sam Walton used to try out new retail strategies.

Store No. 8 is meant to foster relationships with entrepreneurs, particularly those in the fields of artificial intelligence, autonomous vehicles and other emerging technologies.

“We knew we needed to keep investing in the future of retail,” Seth Beal, one of the principals of Store No. 8, said in a recent interview. “We’re making sure that we make the right short-term decisions but don’t neglect the long term.”

Beal, who was previously a senior vice president for global marketplace and digital store operations at Wal-Mart, will be joined by Katie Finnegan, who led Jet’s corporate development and has a background in fundraising and mergers.

“When the mother ship is ready, we’re sort of ahead of the eight ball,” Finnegan said. “Our goal is to have whatever we work on integrated into the mother ship.”

Store No. 8 is somewhat like corporate venture arms at other companies and will be charged with identifying emerging technologies that could prove useful.

But rather than simply taking stakes in existing ventures, the new division is intended to help create new startups. It will also strike strategic partnerships with other promising young e-commerce companies.

“Along with incubating new ventures,’’ Finnegan said, “Store No. 8 will be able to draw on Wal-Mart’s resources to support any startups that it launches.

“We’re giving these portfolio companies the best chance for success,” she said.

Beale and Finnegan declined to comment on how much money Wal-Mart would commit to the new venture, saying that Store No. 8 did not have a set goal for money to deploy in its investing.