An insider’s view of Walmart’s digital transformation

With technology evolving at a feverish pace, how does the nation’s largest retailer adapt? Since its inception, Walmart has distinguished itself as a leader in using technology to optimize operational efficiency and deliver a high-quality shopping experience. But as technology has evolved, and Walmart has grown, the company has faced the challenge of finding technology partners that can scale to meet its needs.

Jeremy King, Walmart’s executive vice president and chief technology officer, offered some insight during the recent NRF show on how the company formulates its technology strategy, what technologies are driving change and which ones it is considering for the future.

During the panel discussion, moderated by Wall Street Journal reporter Sara Castellanos, King said Walmart has integrated its internal operations and retail divisions to allow the company to adopt technology faster.

“There are so many things that are better in this (organizational) structure,” he said. “It’s so much simpler to get things done now.”

“We are expanding the technology investment rapidly,” he said, adding that 1,700 technology employees were hired in 2018, and another 2,000 will be brought on this year.

Automating customer processes

Automating customer processes has been a big benefit for the company, King said, as “People want a digital experience. It’s no longer acceptable not to have a digital experience.”

Last November’s Black Friday was the best in the company’s history, King noted. “Every year it seems to get bigger,” he said. “It’s amazing to see how many people come out for Black Friday.”

Another example is Marketplace Returns, minimum returns standards for third-party sellers on Walmart’s website. The standards ensure a consistent customer experience, he said.

E-commerce has benefited the company in other ways as well, King said, noting its use of stores for online order pickup has helped to integrate its digital and physical operations.

The key technologies

Focusing on specific technologies, cloud technology has delivered some of the biggest improvements, King said.

Last year Walmart and Microsoft announced a five-year partnership to drive digital transformation across Walmart, boost shopping speed and empower retail associates.

Walmart is moving most of its customer facing technologies to Microsoft’s Azure cloud, King said.

King also cited machine learning as one of the most important technologies Walmart is using, going as far as to say people underestimate how big of a change it will be. Machine learning — the use of algorithms and statistical models to perform work without explicit instructions — is a technology Walmart applies across several areas.

The company has applied machine learning in developing its online shopping cart, in its shelf scanning robot, and in routing and scheduling, King said.

“There’s a huge amount of machine learning in that robot,” King said regarding the company’s shelf scanning robot, which helps to predict shelf inventory more accurately. Predicting inventory accurately addresses one of the biggest consumer complaints — out of stocks, he said.

Where retailers used to consider it sufficient to be 95 percent in stock, it now has to be closer to 100 percent, he explained, thanks in large measure to e-commerce. When customers order online, they have to know it will be in the store when they come to pick it up.

Data brings a competitive advantage

King stressed that machine learning requires human participation, as a human has to be involved in assigning value to the data.

Walmart, because of its size, has more data than most of its competitors, which King cited as a critical competitive advantage. “Our data can drive reinforcement learning faster than any other company,” he said. “The richness of our data is really helping us.”

Virtual reality, another retail technology, has been used to improve training. “It’s a really great way to learn,” King said, adding that it helps employees grasp information better.

Blockchain benefits the food supply chain

Blockchain technology, another up-and-coming technology, has been deployed in the company’s food supply chain, King said. The company has taken a pioneering role in using blockchain technology to improve its food supply chain.

In an NRF podcast interview, King went as far as calling blockchain technology a game changer for the supply chain, but it is still in its early phase of development. “I do think it has changed the way we think about fresh produce,” King said.

The blockchain ledger also makes it easy for a company to respond to recalls, he said. “It’s all about food safety,” he said. “Consumers are asking about this.”

The technology being used in the company’s cold chain has also allowed it to deliver fresh food to customers successfully, which King called a “game changer.” Some of Walmart’s biggest food delivery orders are for schools and senior centers.

The technology adoption process

Adopting new technology requires a lot of trial and error since new technologies are not always sufficiently developed when they are introduced. For example, Walmart announced Scan & Go to some stores in 2018, allowing customers to make purchases using a smartphone, but discontinued shortly after, claiming a lack of consumer interest.

Even though Sam’s Club continues to use Scan & Go, King said there were too many customer errors with the Scan & Go technology. He said it is sometimes necessary to wait for a technology to improve before doing an extensive rollout.

King is also very interested in computer vision technology, but he said the technology needs to do a better job scanning smaller size items. The computer at present needs to get too close to the item, he noted.

The expansion of automation in company operations has not reduced its workforce, King said, meaning the company still faces the challenge of getting employees to embrace technology. Meeting this challenge successfully, he said, requires having commitment from the top.