Walmart’s trek to become the retail industry’s tech giant

When you think of Walmart, what comes to mind? While many might picture bright fluorescent lights, the infamous “yodeling kid” viral video, or the interesting fellow shopper one might have encountered on a late-night shopping run, far fewer will likely think about elaborate IT operations powering an extensive supply-chain network, paired with constant plans for tech innovation.

With close to $569 billion in US sales just last year, Walmart has a reputation for competitive pricing. It has also used that revenue to quietly build up a robust IT infrastructure to support its operations, propelling itself to the forefront of conversations about GenAI and innovative e-commerce technology.

Has Walmart graduated from a retailer to a sophisticated tech company comparable to the likes of its arch-rival Amazon? IT Brew caught up with several retail tech experts to discuss the retailer’s tech strategy and if it has outgrown its sole retailer identity.

Sam I am. Walmart co-founder Sam Walton opened the first ever Walmart in Rogers, Arkansas, in 1962. In his 1992 memoir Sam Walton: Made in America, the businessman detailed his efforts to find a better way to track merchandise, ultimately implementing formal replenishment and inventory systems within his stores—something he admitted Walmart struggled with in its early days.

Walton described himself in the book as no “whizbang computer guy,” but remained curious about how technology could enhance his business. He decided to enroll in an IBM school for retailers in upstate New York, partly in search of talent that could help him achieve better systems for his stores.

That decision eventually paid off. A trip with a classmate to visit a computerized warehouse—now commonplace facilities that use computers to keep track of merchandise information—led Walton to invest in his own, making him an early adopter of such technology. Walton also recalled meeting Abe Marks, the first president of the National Mass Retailers’ Institute, at a conference and learning from him how to use computers to track merchandise and improve his logistics processes—qualities that David Ball, president of the Grayson Company, a retail consulting firm, said Walmart has now become well-known for.

“Their logistics systems are very well thought of in the industry, and have been for decades,” Ball said. “I mean, this goes back to the far less sophisticated days of it, like in the ’80s and the ’90s.”

In a brief anecdote shared in Walton’s memoir, Marks said computers were essential to Walmart’s success and that Walton’s intuition about the necessity of the technology for his business was ahead of its time.

“He could not have built a retailing empire the size of what he’s built, the way he built it,” Marks is quoted in the book. “He’s done a lot of other things right, too, but he could not have done it without the computer. It would have been impossible.”

Omnichannel surfing. While it may seem like Walmart has always grasped the importance of emerging technology, some retail tech experts told IT Brew the company found its footing in the mid-2010s, as traditional retailers struggled with the rise of e-commerce and omnichannel shopping. Wells Fargo Securities analysts estimated that sales from Walmart.com accounted for less than 2% of the company’s overall sales, or roughly $6 billion, in 2011.

“There were digital natives like Amazon, who didn’t really have stores and suddenly they were taking huge share and really pulling customers away from and business away from Walmart,” Ball said. “So, they had to respond.”

“You saw a lot of retailers even go out of business, and the larger players like Walmart and Target and the likes had the capacity to invest. They had the capital to invest, but they were behind,” Moody’s Ratings VP and Senior Credit Officer Mickey Chadha said. “Especially Walmart was behind.”

Walmart made several moves to strengthen its e-commerce business, including acquiring social media startup Kosmix in 2011. Sravana Kumar Karnati, EVP of Walmart Global Tech platforms, told IT Brew in an October interview that Walmart had been in the e-commerce business since the early 2000s and the roughly $300 million purchase was intended to further strengthen its technology.

“With that came some of the foundational technologies that powered e-commerce,” he said. Following the acquisition, Kosmix employees became members of Walmart’s technology arm, Walmart Labs, which worked on customer, merchant, and supply-chain technology, among other things. Walmart Labs later became Walmart Global Tech.

The tech acquisitions didn’t stop there. In 2016, Walmart purchased e-commerce company Jet.com for roughly $3 billion, the retailer’s third-largest purchase to date. Ball said the acquisition was not only intended to help Walmart “jump into a more generalized version of e-commerce” but also to acquire tech talent. Jet.com CEO Marc Lore—who previously co-founded e-commerce holding company Quidsi—led both Jet.com and Walmart’s online website as part of the acquisition.

“Strategically, they were trying to raise the bar of their IT intelligence and be able to develop an internal organization capability with these new resources,” Ball said.

Four years later, Walmart ultimately chose to discontinue Jet.com. While discussing the move on a Q1 2021 earnings call, Walmart president and CEO Doug McMillon, who is set to depart the company next year, said the Jet acquisition was “critical to jumpstarting” Walmart’s progress in the e-commerce space. In Q1 of fiscal year 2021, Walmart’s US e-commerce sales soared 74% YOY, partly thanks to shifting buyer behaviors during the Covid-19 pandemic.

That competitive tech edge. Beyond Walmart’s efforts to build up its tech talent, the company has embraced several rising tech innovations. For example, Karnati told IT Brew about the company’s longtime use of digital twins to model its supply-chain network and determine new locations for its distribution and fulfillment centers.

“We look at demand patterns. We look at demographics. We look at customer segmentation,” Karnati said.

Joseph Ours, a director of AI strategy at Centric Consulting, said Walmart’s use of digital twin technology, which IT Brew previously reported is still in early phases of widespread adoption, is one of the first use cases in the retail space.

“I don’t know anybody else who does that,” Ours said.

The retailer also debuted its “super agent” strategy to the world earlier in the year, which includes a customer-facing AI agent named Sparky that can provide product recommendations. The company also recently announced a partnership with OpenAI that will enable customers to do their shopping directly in ChatGPT, another effort by the retailer to support cutting edge AI-first shopping experiences.

In 2021, Walmart even took a jab at selling its own e-commerce technology, a move Amazon made in the early 2000s, to assist smaller retailers with “buy online, pickup in store” capabilities to other retailers, as well as other software capabilities. However, those efforts were later discontinued, according to Karnati.

“It was pretty successful in terms of our ability to solve those problems, but we felt that we need to have a full focus on our own business and build out the ecosystem that we set out to and so we sort of scaled back on those efforts,” Karnati said.

Does that make Walmart a tech giant? When asked if he views Walmart as a tech giant, Karnati said the company refers to itself as a “people-led tech-powered company.” Greg Buzek, founder and president of research and advisory firm IHL Group, said while Walmart is of course massive in the retail space, it has also spun itself into a notable IT shop.

“They have more IT people working in IT than a lot of the vendors that sell solutions,” Buzek said. “So, they would absolutely be an IT company as well as a retail company.”

R “Ray” Wang, founder, chair, and principal analyst at the technology research and advisory firm Constellation Research said he regards Walmart as a digital giant, but it has yet to rise to the level of more notable tech players like Amazon.

“If they started buying data centers and power plants and energy then, yes, but they’re on the edge,” Wang said. “They’ve got the ad networks. They have digital products [and] digital services. They have memberships.”

While Walmart has made strides, Ball said the company’s still strongly identified with traditional retail as opposed to technology.

“One of the things that Amazon really did from the beginning was, I think they were positioning themselves as a technology-driven retailer, and Walmart’s origins are in traditional retail,” Ball said. “What they’re kind of coming to now is, there are…opportunities in technology, but that’s not in their roots.”