With so much focus on digital pureplays growing, setting down physical roots and luring consumers away from traditional retailers, it’s no wonder the word “disruption” is on everyone’s lips.
These nimble new companies have sprung up across retail sectors, using new technologies to rewrite the old rules of commerce.
For a 5,400-store chain like Walmart—which once itself dominated the headlines as the bane of established retailers everywhere—these startups could be a sign of the beginning of the end. Instead, the big box retailer is using them as inspiration as well as partners on the path to what’s next.
With the acquisition of Jet.com, Walmart came out on the offensive and signaled its willingness to meet today’s challenges head on. Since then, the company has scooped up a variety of e-commerce retailers across apparel and footwear along with the executives that made them standouts in their categories. The company is now on the cusp of rolling out a digital mall, anchored by Lord & Taylor.
Taking the leap from brick-and-mortar behemoth to chief online competitor to Amazon required a shift at the core of the business.
“Shaping the culture of the organization, the behaviors of the organization and literally how we work is ultimately more than anything else going to decide if we win with customers or not,” said CEO and President Doug McMillon, CEO of Walmart, speaking during a keynote address at the NRF Big Show on Sunday. “What that looks like is a company that had a core group of silos about its operations, logistics, etc that started to work in an agile way across those silos and in some ways more like a tech company and that enables speed, effectiveness and efficiency.”
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[Read more about how Walmart’s efforts rivaled Amazon’s in 2017: Infographic: The 2017 Amazon, Walmart Turf War]
Beyond rethinking its day to day operations, Walmart launched the Store No. 8 technology incubator in March as a separate entity to foster new ideas in an entrepreneur-friendly environment.
At a separate talk on Monday, Lori Flees, SVP of Next Gen Retail and principal of Store No. 8, discussed the challenges and advantages of driving innovation for a company with the size and scale of Walmart.
“For us, Store No. 8 is a change in how we work,” Flees said, echoing McMillon’s comments from the day before. “The thing we’ve learned most was how do you get the leverage of Walmart but set it up separately for speed?”
The first step toward creating an environment where Walmart could foster the next Marc Lore was thinking like an entrepreneur. By tapping into what drives top talent, Store No. 8 has been able to attract folks who would typically be hesitant to sign onto a giant organization.
Store No. 8 provides the environment of a startup with the benefits of a dedicated budget—which means entrepreneurs don’t have to bootstrap their way through development or split their focus between the business and constantly raising funds. It also means they earn an attractive salary from the start without the gamble of maybe one day selling their businesses for a windfall down the line.
The positive buzz surrounding Walmart’s recent developments has also helped.
“When you see a company show you’re investing to win and you’re starting to show some momentum, people are attracted to that,” Flees said.
Ultimately though, it’s the resources and opportunities to bring their ideas to market that’s really the draw.
“When you get an entrepreneur who’s passionate about creating the right customer experience and disrupting a certain part of retail and they’re very passionate about making that impact, being able to do that and then having the ability to scale it with an existing company—so not trying to sell into a company but having the data, the customers, the store footprint with which they can deploy that innovation—is incredibly exciting for entrepreneurs,” she said.
While having Walmart backing the venture has clear advantages, Flees said there are times when her team has had to unlearn a thing or two and make up its own rules. She said there are lots of examples of this, including how Store No. 8 works with vendors. “Contracting with a vendor is something that Walmart does very well, and we have very clear process and protocols but the vendors we work with in Store No. 8 are very cash strapped and they’re startups as well. So how do you change the process of something simple like accounts payable and contracting in a way that gets cash to them so they can serve you?” she said. “If your core focus is speed, you have to revisit all of those procedures.”
With speed as the driving force, there are also times when even the incubator can’t come up with solutions fast enough. For instance, when it came to voice commerce, Walmart opted to work with Google’s assistant, which was already established and in the market. But even that partnership wasn’t completely turnkey. The retailer then needed to develop technology to allow Google’s software to seamlessly integrate with Walmart’s systems.
“Us trying to build everything ourselves isn’t the right strategy,” she said. “It’s a combination of knowing what you need to own in terms of the IP and where you need to work with others to go faster. It’s a constant trade off.”
To those that say it’s Walmart’s size that’s enabled it to set up a laboratory like Store No. 8, Flees said it’s less about deep pockets and more about deep shifts in mindset. “It came down to the senior leadership team taking a view of where retail is going over the next 20 years and figuring out in what places we need to be leading in capability development in order to disrupt ourselves rather than having others disrupt us,” she said.