From advertising to A.I., Walmart does much more than retail

You may know that Walmart is just a place to stop for milk or paper towels, maybe a few other things, on your way home. But the biggest retailer in the world is not just selling groceries – it's likely you do not even do a lot of things.

General Manager Doug McMillon says the company is becoming more of a "digital enterprise".

He is testing a retail laboratory in New York City using artificial intelligence. She recently, for an undisclosed amount, acquired Polymorph Labs based in Silicon Valley, with the goal of using start-up technology to facilitate advertising with Walmart for small brands. In February, she bought Aspectiva, a startup that examines a customer's browsing behavior and helps formulate product recommendations without revealing the cost. He adds veterinary clinics to his stores and now operates an online pet pharmacy. And he continues to incubate his own brands – in the last quarter, he launched one that sells home furniture, called MoDRN.

In many ways, Walmart is increasingly resembling Amazon's Amazon, which is increasingly resembling Walmart by opening stores and trying to sell more groceries. Both companies are trying to stay in the industry. While Amazon represents about 50% of all online sales in the US, Walmart is gaining ground: it surpassed Apple in 2018 to become the third largest online retailer in the country, ahead of only Amazon and eBay, according to eMarketer .

In addition to all the work he does in his physical stores, Walmart also believes he can have a bigger and better advertising activity, comparable to Amazon's.

Last year, Amazon became the third largest advertising platform in the US, behind Google and Facebook. With more and more buyers going directly to Amazon, not to Google, to begin their product searches, the e-commerce giant has the opportunity to do more. According to a FeedAdvisor study, when consumers are ready to buy a specific product, 74% of them go directly to Amazon.

And Walmart is trying to do the same. That's one of the reasons he's trying to make his website more a landing page for other well-known brands – until now, it's been integrated with Walmart. com, Lord & Taylor, Fanatics and Advanced Auto Parts.

"As we think of new sources of revenue and revenue, we know we can do more in the advertising space," McMilon said Thursday as Walmart announced its quarterly results.

Meanwhile, society is deeply interested in technology. That's despite the fact that his tech chief, Jeremy King, has recently been lost to Pinterest's benefit. King, who joined Walmart in 2011, oversaw much of Walmart's digital strategy and also led Walmart Labs, the company's technology arm. With her departure, Fiona Tan, senior vice president of customer technology, has acquired a "high role", according to Walmart.

Just a few weeks ago, Walmart opened an Intelligent Retail Lab Lab, also called IRL, in one of its Maket Neighborhood locations, smaller than a typical Walmart store and simply selling products. Grocery store, in Levittown, New York State. He completely reorganized the store with high resolution cameras, sensors and other hardware to find ways to simplify tasks such as shelves storage and inventory management. A camera, for example, can tell how much a banana is ripe and warn a worker.

"I think what we expect from the lab are tools and products … at the scale of the chain," said Mike Hanrahan, CEO and founder of IRL, at a recent meeting. interview with CNBC. "We think this space is an AI factory … I think [artificial intelligence] will retail retail as e-commerce has been. "

Hanrahan explained that what is being tested at Levittown will be "transformative" in that some of these tools should help Walmart – across all of its stores – reduce the amount of time spent on mundane tasks and give employees more role-centered roles. customer, like welcoming buyers. and answer any questions they may have while browsing. "We are really at the beginning of this trip," he said. "We want to make sure we are at the forefront."

IRL was born from Store No. 8, Walmart's technology incubation platform, which also works on the Spatial & Virtual Reality start-up, as well as the on-demand purchase platform with text-to-order.

Finally, in the hope of further satisfying young consumers, Walmart began acquiring Internet-based retail brands, many of which had specific categories, such as camping gear. These efforts were led by Marc Lore, founder of Jet.com, which is also owned by Walmart.

Until now, Walmart has bought brands in areas ranging from lingerie to the art, through to the larger fashion for women's and men's clothing.

"This strategy is evolving as we learn," Marc Lore, head of Walmart's US e-commerce division, told reporters Thursday during a post-profit phone call. He added that the purchase of these brands helped Walmart improve its profit margin mix, as these specialty retailers tend to sell products at higher prices. As part of Lore's strategy, Walmart also collaborates with digital brands. During the last quarter, she partnered with Kidbox to launch, for example, a subscription box for children's clothing.

In the future, Walmart is increasingly looking for deals with brands that can sell on Walmart.com, in Walmart stores and directly to consumers, by themselves, "said Lore. "We are putting more emphasis on brands that can cover all three … channels."

Thanks to the initiatives of Lore and his team, Walmart's online sales grew 37% in the first quarter, with fashion and home surpassing other categories, Walmart said. That was better than online sales growth of 33% a year earlier, but down from a 43% increase over the holiday quarter.

The focus has also been on the supply chain and the speed of delivery. This week, the company began deploying overnight delivery for online orders in three US markets, with plans to reach 75% of the country by the end of the year. This is after Amazon, April 25, announced its intention to spend $ 800 million during the second quarter to make free delivery a day to all premium paying members.

Walmart did not say how much it would cost to make overnight delivery possible, but said that this initiative was a goal she had been working for some time. Inventories increased 5.9% in the last quarter, as Walmart purchased additional merchandise to stock certain distribution centers in anticipation of overnight delivery, the company said.

With all these investments, Walmart is silent about the exact amount of his expenses. We know that he bought Jet.com for $ 3.3 billion in 2017. And, to a lesser extent, the price of Walmart's acquisition of the biggest fashion brand Eloquii, the # Last autumn would have been $ 100 million. A familiar person had told CNBC that the acquisition of Art.com by Walmart had cost about the same price.

In the meantime, Amazon has spent more than $ 13.6 billion in technology in 2018, making it the largest IT investor globally, according to International Data Corp. , Said IDC.

In itself, these actions may seem unable to move the needle for Walmart, but taken together, this shows that the company hopes to do much more than sell you gardening tools or back-to-school gear.

"Retailers will have to innovate and find new sources of profit," UBS analyst Michael Lasser said in a research note. "Traditional pivotal retail business models will not be easy, but they will be needed over time."

Walmart shares rose nearly 2% Thursday afternoon. The stock, which has a market value of about $ 292, has risen about 9% since the beginning of the year. By comparison, Amazon shares rose about 27% this year and have a market value of about $ 939 billion.