Remember in October when Walmart warned shareholders that its earnings per share could fall by as much as 12 percent in fiscal 2017 because of a plan to pump $2 billion into e-commerce technology over the next two years?
Some panicked investors turned tail and ran, sending the retailer’s stock into a 10 percent tailspin that day, while its market value plunged by nearly $20 billion.
But as the old saying goes, you have to spend money to make money—and Moody’s Investors Service recently said that if all goes according to plan, Walmart could catch up on Amazon’s online sales.
Jeremy King, chief technology officer of the company’s global e-commerce operation, feels confident about that forecast, too. As the brains behind the massive overhaul of Walmart’s supply chain management system—one that’s intended to rebuild everything from how the website works to underlying transaction software—he has to be.
Speaking recently to The Wall Street Journal, he said, “My peers, they think I’m out of my mind. Most people don’t replace entire systems in one shot, especially with from-scratch development. But given how rapidly this place is changing, we didn’t have time to screw around.”
Dubbed Pangaea, the project kicked off in 2012. According to some estimates, Walmart has already spent about $6 billion to build new cloud infrastructure and data centers and write its own search engine.
And the company has committed to spending a further $900 million on e-commerce capabilities in 2016 and $1.1 billion the year after. King will help decide how that money should best be spent to push the retailer further along an open-source path and compete with Amazon.
So, instead of relying on the one-size-fits-all software that’s available commercially, Walmart’s 3,600 engineers, data scientists and other IT professionals (based in Silicon Valley, India and Shanghai) will continue to create their own.
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While some pieces of Pangaea were in place for last year’s holiday shopping season, such as eReceipts (a self-explanatory system that sends an electronic receipt to a shopper’s mobile device following an in-store purchase and an easy way for the retailer to collect e-mail addresses), the revamped technology will truly be put to the test this year.
King told the Journal that the IT team would be working in three shifts around the clock in California, the U.K. and India to meet the rush of e-commerce shoppers eager for Black Friday “doorbusters” that went live just after midnight on Thanksgiving—hours before they would be available inside U.S. stores.
Unfortunately for Walmart, things didn’t go according to plan. Though the website didn’t crash, it did slow considerably as it struggled to deal with demand, which frustrated shoppers who weren’t able to complete their purchases.