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Walmart CEO: ‘Playing Catch-Up’ in E-Commerce After ‘We Fell Behind’ 

The retail world took notice when June headlines trumpeted the billion-dollar loss draining Walmart’s e-commerce business.

But CEO Doug McMillon seemed nonplussed about the state of Walmart’s online affairs as he addressed the matter head-on at Fortune’s Brainstorm Tech 2019 event, held July 15-17 in Aspen.

“We fell behind and have been playing catch-up,” McMillon admitted in a broadcast from the conference, adding that Walmart is “doing a number of things to accelerate the progress.” Among those: an acquisition spree that’s brought millennial-focused, digitally native brands including Bonobos, Eloquii, ModCloth and Bare Necessities under its umbrella in the past few years.

And though industry watchers make much of Walmart’s rivalry with Amazon, McMillon takes a decidedly “imitation is the sincerest form of flattery” approach to getting the store-based retailer’s e-commerce strategy up to speed with perhaps the best benchmark of online retailing in the U.S.

“If someone’s doing something better than we are, let’s copy and paste” what works, McMillon said. Amazon, he added, has forged a reputation for its customer obsession, innovation and speed, all qualities “we admire.”

For Walmart, elevating online means optimizing offline as well—and exploiting the strengths of each.

“Stores have some advantages and we’re trying to make the best of those,” McMillion said, “and put them together in a way that’s unique and that customers will find that not only saves them money and time but creates the optimal experience.”

Like many retailers looking to succeed in the age of omnichannel, Walmart is aiming to wield its sprawling store fleet in the competition for customer who like blending with ease of ordering and the convenience of getting their orders quickly from a nearby store. Amazon’s 100 e-commerce fulfillment centers might dwarf Walmart’s 20, but the big-box retailer operates 2,500 stores will offer pick-up and delivery services reaching 60 percent of the U.S. by year’s end.

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“Once you know how to pick an order efficiently, that enables delivery from that store over the last mile to get to someone’s home,” McMillon explained.

As retailers angle to win that last mile, they’ve come up with creative ways to gain even more intimate access to the customer, from Amazon delivering packages to car trunks and inside homes via its Key service to Walmart’s idea to bring groceries straight into the refrigerator. That service is expected to debut in select cities this fall and will also enable the store’s employees to collect any Walmart.com purchases (left in a conspicuous area) that the customer has designated as a return.

McMillon described learning to use stores as effective fulfillment centers for grocery as an important step toward picking orders from other parts of the store, no small task when 120,000 SKUs fill the average Walmart supercenter. But with 90 percent of the U.S. population living within 10 miles of a Walmart store, there are important dollars—and wallet share—at stake.

And McMillon dismissed the idea of any “tension” or animosity with Jet.com as a Recode article recently alleged, asserting that Walmart “would buy them all over again” if push came to shove. Though outsiders hailed Walmart as getting into e-commerce when it bought Jet for $3.3 billion three years ago next month, the retail giant had been selling online for some time, but the e-commerce startup simply accelerated those efforts. In fact, McMillon added, Jet executives were surprised to learn how low Walmart’s digital customer acquisition costs were relative to its own, thanks to Walmart’s well-known brand requiring far less effort to attract new users.

Jet was and remains complimentary to Walmart.com, McMillon stressed, noting that the former resonates with an affluent urban customer in a way that Walmart.com can’t truly match. But the two online business now rely on a common back end, he added, an effort to ensure a seamless experience regardless of which platform the customer chooses to shop.

Walmart garnered plaudits for an announcement outlining a plan to reskill and upskill its workforce. Despite the good news for workers, McMillon said headlines still questioned how Walmart was spending its money.

“It’s interesting to me how things are frequently positioned as ‘or’ in the world that almost always to us looks like ‘and,’” he explained. “Will you invest in associate wages or e-commerce? And. Both. Will we invest in lower prices at store level or fulfillment capabilities to support e-commerce? And.”

There’s so much happening and changing in the world of retail that there’s no time for short-sighted debate, according to McMillon. “Strategy is so fluid these days, we’re constantly trying to calibrate that,” he added.

The CEO expressed optimism over what lies ahead for the “future of inventory management,” advancements that could spell billions in savings for a retailer of Walmart’s size.

“We’re starting to see pieces of it come to life now with enhanced automation in DCs that we have in tests and pilots,” McMillon shared, “and also the Internet of Things is starting to happen at store level.”