Digital Transformation: A Walmart Case Study on Retail Innovation

Walmart, founded in 1962 by Sam Walton, is one of the world’s largest retailers, operating a vast network of stores and an extensive supply chain. Recognizing the need to adapt to the changing retail landscape, Walmart embarked on a comprehensive digital transformation path to enhance its operations, customer experience, and market position.

Walmart’s journey toward digitalization is a compelling case study of how a retail giant adapts to the digital age to stay competitive. The foundation for this transformation was largely laid during the tenure of CEO Mike Duke, back in 2009. Mike Duke’s vision was to transform an enterprise based strongly on supply chain and operational excellence to one that is fast becoming ‘entrepreneurial,’ ‘experimental,’ and ‘flexible.’

During this time, he addressed to his shareholders that, “With our stores and low prices, we can really take advantage of mobile technology to ensure transparency. We can combine our stores, our systems and our logistics expertise into one continuous channel to drive growth and serve the Next Generation Customers around the world. So let me be very clear — in global e-commerce, we will not just be competing; we will play to win.”

So, how did Walmart really play to win? The answer lies in Walmart’s aggressive foray into digitalization.

Walmart Global eCommerce: The cornerstone of Walmart’s digital transformation

In 2010, Walmart consolidated its eCommerce activities around the world in a Global eCommerce Division. This division had three goals: 1) Develop and execute a global eCommerce strategy; 2) Accelerate global online channel growth; and 3) Create technology platforms and applications for every Walmart market.

Based in San Bruno in Silicon Valley, Walmart Global eCommerce set the stage for an organization-wide effort to build a digital footprint and integrate it with the physical shopping experience. Making swift progress on its goals, the division revamped Walmart.com’s search engine in its first year, improving online visitors’ conversion to buyers by 10 to 15 percent. In the next few years, Walmart scaled up Global e-commerce to more than 3600 associates worldwide, with more than 2200 of them in Silicon Valley. A thousand Silicon Valley associates were hired in 2014 alone. The division also made 14 acquisitions in the last three years.

Fostering digital innovation with WalmartLabs

Walmart’s Global eCommerce division has a key constituent – WalmartLabs, which has played a crucial role in furthering digital innovation. WalmartLabs was designed to be an idea incubator, with a mission ‘to build products that seamlessly integrate the online and in-store shopping experiences for millions of customers’.

The lab initially focused on modernizing Walmart’s website, working on solutions like a next-generation search engine and mobile applications that can deliver personalized experiences. It eventually expanded its scope to developing technological innovations for other business areas, such as the supply chain, cloud computing, and data analytics.

Delivering service with intuitive mobile apps

Walmart’s e-commerce resurgence was in part propelled by the growing success of their mobile app. In 2012, Walmart added geo-fencing to its app, a feature that senses when a customer enters a Walmart store and, from there, allows him/her to browse the store’s local ads, offers, and item locations. The app allows customers to scan product bar codes and QR codes to access product information, ratings, reviews, and additional content. Walmart further updated the app in 2014 to help customers pinpoint the exact aisle location of a product in its stores. The app also allows customers to create shopping lists by speaking into their phones, use digital coupons, and even calculate the total price of the items in the cart in real time basis.

To further strengthen its core promise of offering competitive prices, Walmart launched another app feature called ‘Savings Catcher’ – a feature that scans customer receipts and compares Walmart prices to those of their competitors. If the competitor’s price was lower than Walmart’s, customers would get a gift card for the difference. They also rolled out ‘Walmart Pay’, a mobile wallet integrated with the app that allows customers to pay for in-store purchases using their smartphone.

By 2019, the Walmart app became the number one shopping app in the U.S. on Black Friday, toppling Amazon from the top spot for the first time ever. While Amazon has since regained its lead, these strategies demonstrated Walmart’s ability to remain competitive in the mobile shopping space.

Growth during the pandemic

While the mobile app had an important role in drawing in more customers, another crucial strategy that helped fuel their e-commerce growth during the pandemic was the ‘Buy Online, Pick up in Store (BOPIS) service. Back in 2013, Walmart piloted this service, which expanded into 1,000 locations after four years. By the time COVID hit, the BOPIS became a leading sales driver in retail. As a result, the company had already set their foot well ahead of the pack and by 2021, Walmart had cornered the largest share of total BOPIS orders among all retailers. 

Another service that Walmart launched during the pandemic was Walmart+, a membership program designed to compete with Amazon Prime. It offers early access to promotions and events, free delivery from your store, free shipping, and much more. To upgrade the convenience of their deliveries, the company then introduced InHome, a next-level service where highly vetted Walmart associates can go into a customer’s house and place the products in their fridge, cupboards, or garage. To ensure security, the associate is only given one-time access to the home and wears a body cam that records every minute of the delivery.

Making use of data to offer a personalized shopping experience

Walmart leverages its immense trove of data to gain insights into consumer behavior, market trends, and operational efficiencies. By analyzing vast amounts of customer records, including purchase history, demographics, and online browsing patterns, Walmart can tailor its product offerings, pricing strategies, and promotional campaigns to better resonate with its target audience. Through predictive analytics and machine learning algorithms, Walmart can anticipate consumer demand, optimize inventory levels, and identify opportunities for cross-selling and upselling, thereby driving incremental sales and revenue growth.

An example of Walmart’s use of Big Data and social media is ‘Shopycat’.  The “social gift finder” app provides gift suggestions for people’s friends based on data extracted from their Facebook profiles. Shopycat also surfaces friends for whom to buy gifts, based on how much people interact with them. Users can also get notifications of their birthdays. When people hover over a gift that has been suggested for a friend, the app shows why it is suggested. For example, it can show that a person “Liked” it on Facebook or made a comment about it on a wall post or status update. 

Another example of Walmart’s intelligent use of data is its ‘Polaris’ search engine, which powers its website and mobile apps. ‘Polaris’ uses semantic search technology that understands the contextual meaning of a shopper’s search and generates more meaningful results. For instance, when a customer who regularly searches for movies tweets that they “I love Salt”, the search engine recognizes that the customer is referring to the Hollywood movie ‘Salt’ and not condiment salt. The use of Polaris helped Walmart improve conversions drastically.

Throughout its digital journey, Walmart stayed true to the ‘everyday low prices’ strategy that made it a retail titan. Shoppers enter the Walmart store knowing that they will find an expansive selection of products at the lowest prices. It’s a simple brand promise, and it works. This commitment to offering low prices allows Walmart to fare better, particularly during times of high inflation and economic downturns.

Acquisitions and partnerships

Walmart acquired several tech startups and e-commerce companies to fortify its digital strategies and online retail capabilities. One of its biggest acquisitions was Jet.com, a fast-growing e-commerce business that was then gaining over 400,000 new shoppers every month. Walmart leveraged Jet.com’s digital expertise and resources to help fuel its own growth in online retail. 

They even partnered with Microsoft to use the tech company’s cloud, Internet of Things, machine learning, and artificial intelligence solutions to improve the shopping experience. To further streamline business operations and cut costs, they outsourced their finance and accounting functions to an external firm.

By leveraging the expertise of other organizations, whether through acquisition or partnership, Walmart was able to boost its capacity, make faster progress, and focus on critical areas of its digital transformation. 

Factors that drove digitalization at Walmart

The company has been enjoying enormous growth over the last several years. However, the main factors that drove the company towards digitalization are the demographic changes in the US population, changing consumer habits and expectations, the rise of mobile computing, the need for more speed and efficiency, and the growing challenge from Amazon.

While Amazon remains a formidable leader in online retail, Walmart continues to enhance its digital capabilities and make a path in the e-commerce market. It’s currently the second-largest online retailer in the U.S. by market share. Walmart’s revenue for the quarter ending April 30, 2024, was $161.508B, a 6.05% increase year over year.

Walmart learned a painful lesson in the early days when it didn’t invest enough in online retail. But its massive infrastructure, intense focus on innovation, and willingness to embrace new ideas made them a strong contender in the e-commerce space.

What CTOs can learn from Walmart’s successful implementation of digitalization

A few lessons that can be learned from Walmart’s successful journey are:

Emphasize strong leadership  

Strong leadership is crucial to the success of any business. Walmart’s strong leadership team was instrumental in driving the company towards digitalization, ensuring that everyone was aligned with the company’s strategic goals.

Engage/communicate with the employees

Engaging and communication is essential to building a resilient and adaptable workforce. Walmart engaged and encouraged workers to learn and try something new, which helped foster a culture of innovation and adaptability.

Promote adaptability

Walmart was able to stay ahead of the curve because of its adaptable nature. It quickly changed its operations to meet the changing customer needs and preferences. In all, it built a culture that nurtures flexibility and agility.

Always focus on customer experience

No matter how far the company when, Walmart always prioritized customer experience. They made a concerted effort to tailor its offerings to individual customers and invested in initiatives like online grocery pickup and delivery to make shopping more convenient and efficient. All of this helped in building loyalty and driving sales.

Digital transformation is an inevitable megatrend that has to be embraced for an organization’s success. However, this process can cause a fatal failure if not deployed correctly. The case of Walmart provides an example of good timing and strategic planning.

In brief

Walmart’s digital transformation has strengthened its position as a leading global retailer, enabling it to compete with e-commerce giants and adapt to changing consumer preferences. Its digital journey is a testament to how future leaders and CTOs can boost organizational success.