Wal-Mart fosters innovation culture
Predicting the future of retail is challenging for companies like Wal-Mart Stores Inc. because of the rapid pace of change taking place with technological innovation.
Greg Foran, chief executive officer of Wal-Mart’s U.S. stores, said last week if he were asked to write down everything that will happen over the next few years, most of it would be wrong. Foran said he’s “just not that smart” at projecting what ideas will and won’t stick with consumers.
“What I do know is that you need to have a few things in the hopper,” Foran said. “You need to be prepared to get out there to have a shot.”
Wal-Mart spent much of its shareholders week, which ended June 2, demonstrating its commitment to trying new things, detailing innovations that are being tested and implemented as the retailer races against competitors to meet the needs of consumers. Those ideas touch nearly every aspect of the business, from new technology aimed at helping workers perform their jobs better to services designed to let customers choose how they want to shop at the retailer, whether it’s online, in the store or a combination of both.
One of Wal-Mart’s newest tests is a delivery service that will pay workers to drop off packages at the end of their store shifts. The service, which is voluntary for employees, was designed to tap into what Wal-Mart believes are its advantages — 1.5 million U.S. employees and 4,700 stores — to help lower delivery costs and get products to customers quicker.
Marc Lore, Wal-Mart’s U.S. e-commerce chief, said the concept has the potential
to be a game-changer. Chief Executive Officer Doug McMillon took a more cautious approach. He said to expect a slow process and added employee delivery will be one piece of Wal-Mart’s last-mile delivery strategy.
Last week, Wal-Mart also revealed it had recently opened an automated grocery pickup kiosk in Warr Acres, Okla., that will operate 24 hours a day and allow customers to place grocery orders online and collect them in a minute or less.
Wal-Mart has installed pickup towers — giant vending machines nicknamed Rapunzel — at some stores that quickly dispense items purchased online. The company continues to test grocery delivery in about 10 stores through a partnership with ride-sharing services Uber and Lyft, which was announced last year.
“Not everything that we do will actually stick and that’s the nature of the business we’re in,” Foran said. “But that’s the nature of trying to predict the future.”
Executives believe the commitment to innovation has played a role in Wal-Mart’s success during a challenging time for retailers. While sales have declined at other big-name chains, Wal-Mart reported same-store sales growth of 1.4 percent and traffic increases of 1.5 percent in the first quarter. U.S. e-commerce sales also increased 63 percent.
Sucharita Mulpuru, an independent retail analyst, said last month companies can’t expect a 100 percent success rate as they test new ideas. But the chances of developing a successful idea are much greater for a company like Wal-Mart if they’re willing to make their share of calculated risks.
“I think the hope is very much to do like what Google, Facebook and Amazon have done, which is kind of throw a lot of things against the wall,” Mulpuru said, pointing to Wal-Mart’s $3.3 billion acquisition of Jet.com. “If one of the experiments sticks and could be an engine of growth for the future, that is so worth all of the pain that may come with experiments that fail.”
Some ideas have taken hold at Wal-Mart the past two years, including curbside grocery pickup service. Wal-Mart is continuing to roll out the service — in which customers order groceries online, drive to the store and have employees bring them out to their vehicles — rapidly this year.
Wal-Mart also recognized Senior Vice President Daniel Eckert on June 2 as the company’s annual entrepreneur award winner for the creation and implementation of Walmart Pay, a mobile payment service.
Wal-Mart initially tested the service in a few stores before rolling it out nationwide last year and the company said last week there had been 7.3 million transactions through Walmart Pay.
“Hopefully one of the themes you’ve picked up on
is we’re working on culture,” McMillon told investors June 2 in Fayetteville. “More creativity, more risk taking, more innovation and more speed. … You have to work in a different way and you’ve got to be faster and more creative and I’m pleased that we’re seeing some progress there.”
McMillon believes the company has moved away from a time where it was “replicating” ideas to pushing for innovation. But there is much more work to do because “it’s competitive out there.”
That’s one reason why Wal-Mart set up Store No. 8, a Silicon Valley-based innovation hub, according to Lore.
He said it’s challenging to think about future innovations while operating the business on a day-to-day basis. So Store No. 8 was designed to identify, invent and invest in ideas like virtual reality, augmented reality and artificial intelligence.
It’s hard to identify exactly what commerce will look like in five or 10 years, but Foran believes his time spent in stores does offer a glimpse as customers increasingly use their mobile devices to check online prices, inventory and other information as they shop.
“You can assume that they’re going to want as little friction in this as you can put in place,” Foran said. “What that all transpires into, I’m not 100 percent sure. What I do try to do and make sure that all of us do is keep our minds as open as we can to what that may mean and what it may look like.”