{"id":35000,"date":"2018-11-13T18:42:54","date_gmt":"2018-11-13T23:42:54","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/walmart-fights-fire-with-fire-traditional-retail-in-the-age-of-machine-learning\/"},"modified":"2018-11-13T18:42:54","modified_gmt":"2018-11-13T23:42:54","slug":"walmart-fights-fire-with-fire-traditional-retail-in-the-age-of-machine-learning","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/walmart-fights-fire-with-fire-traditional-retail-in-the-age-of-machine-learning\/","title":{"rendered":"Walmart Fights Fire with Fire: Traditional Retail in the Age of Machine Learning"},"content":{"rendered":"

\u201cDigital-native retailers remain ahead of incumbents\u2019 technology investments.\u00a0 Retailers that fail to innovate with cutting-edge technology will cede share\u201d [1].\u00a0 Traditional retailers are unquestionably under attack from e-commerce giants like Amazon.\u00a0 Amazon is able to leverage huge amounts of customer data and machine learning techniques to provide a seamless, targeted, and enjoyable experience to online shoppers.\u00a0 But traditional retailers aren\u2019t out of the game yet; in particular, Walmart is utilizing machine learning to create its own competitive advantage in an effort to fight back.\u00a0 Walmart \u201cis on the cutting edge when it comes to transforming retail operations and customer experience by using\u00a0machine learning<\/a>\u201d [2], and \u201cis increasingly becoming a technology company, seeing its transformation into an omni-channel retailer as critical to its continued growth\u201d [3].<\/p>\n

A retailers\u2019 product offering is effectively a buying experience, and established brick and mortar retailers \u201cinsist that their physical operations give them an advantage e-tailers can\u2019t match [4].\u201d\u00a0 This advantage is called omni-channel retail, for which Walmart provides the definition: \u201dWe want to ensure a seamless experience between what customers do online and what they do in our stores\u201d [2].\u00a0 Walmart\u2019s retail footprint generates huge amounts of data, and machine learning can be applied to this data to create engaging omni-channel products that e-tailers don\u2019t have the option to offer.\u00a0 \u201cA wealth of data\u2026is now available; thanks to machine learning, retailers and category managers are now able to analyze not only structured sales history but also unstructured data\u201d [5].\u00a0 Machine learning is an important mega-trend for Walmart because it allows for omni-channel product development that will allow them to compete against Amazon for the future of retail.<\/p>\n

Walmart has recently rolled out numerous product offerings that required machine learning for development.\u00a0 For example, Walmart is encouraging shoppers to order online and pick up in-store, which typically results in add-on sales (a typical benefit of omni-channel presence.)\u00a0 They have used machine learning to offer targeted discounts on online-only merchandise when shoppers agree to pick up in-store [4].\u00a0 They have also installed towers in their retail locations where customers can scan their online order receipt to have a conveyor belt deliver their order within 45 seconds, the logistics of which are powered by machine learning algorithms [2].\u00a0 Walmart is improving the customer shopping experience with \u201cScan and Go Shopping.\u201d\u00a0 Customers can us the Walmart App to complete some aspects of the checkout process before they reach the counter, resulting in a more streamlined, time saving process.\u00a0 Machine learning is employed in both computer vision and sensors for security to make this possible; future developments could bypass the in-store checkout process entirely [2].\u00a0 Walmart is also using machine learning to enhance their home delivery service product by optimizing the delivery routes of their associates [2].<\/p>\n

Walmart is taking a long-term stance on the competitive advantages that machine learning brings.\u00a0 They are developing facial recognition technology (powered by machine learning algorithms) to identify unhappy or frustrated shoppers.\u00a0 \u201cAs the machines learn to identify different levels of frustration through the facial expressions of those in line, it could trigger additional associates to run the checkouts and eventually could analyze trends over time in a shoppers\u2019 purchase behavior\u201d [2].\u00a0 Walmart has made large investments in Silicon Valley:\u00a0 their \u201cStore No. 8\u201d venture launched recently, with a mission of \u201ccreating proprietary next-generation robotics, virtual & augmented reality, machine learning and artificial intelligence technology\u201d [4].<\/p>\n

I would recommend that Walmart take some additional steps to address the e-commerce competitive threat.\u00a0 Walmart could further capitalize on growing IoT technology by integrating tags (like RFID systems) on products to monitor use, stocking level, and location within a household.\u00a0 For instance, if a tag reader was installed in a refrigerator, Walmart could scan everything placed inside and let customers know not only when to restock but also when items are due to expire.\u00a0 RFID systems could monitor how often customers pick up products like laundry detergent, predict how much is left of their stock, and automatically place the item on a personal shopping list in the Walmart App [2].\u00a0 IoT leverage could help create personalized advertising and expand cross-selling activities.\u00a0 Additionally, partnering with a company that provides a voice assistant, like Google, would allow an expansion of Walmart customer service and product advertising.\u00a0 These devices, driven by machine learning to become \u201csmarter\u201d over time by ingesting large quantities of data, could be taught to make tailored recommendations of Walmart products that would fit individual customers\u2019 needs [1].<\/p>\n

In closing, I will posit the following open questions:\u00a0 first, can Walmart recruit the necessary technical talent to manipulate the machine learning required to offer these future products?\u00a0 And, secondly, does Walmart\u2019s core customer demographic (lower-middle class families) actually want these omni-channel \u201cbells and whistles,\u201d or is Walmart\u2019s real goal to bring in a wealthier shopping demographic?<\/p>\n

(799 words)<\/p>\n

[1] Bloomberg Intelligence analysts Anurag Rana, Poonam Goyal, Gili Naftalovich and Morgan Terrant, \u201cArtificial intelligence speeds-up disruption in retail,\u201d\u00a0 Bloomberg Professional Services<\/em> (February 01, 2018).<\/p>\n

[2] Bernard Marr, \u201cHow Walmart Is Using Machine Learning AI, IoT and Big Data To Boost Retail Performance,\u201d Forbes<\/em> (August 29, 2017).<\/p>\n

[3] Mass Market Retailers, \u201cWalmart\u2019s E-Focus,\u201d Volume 35 No. 2<\/em>, (January 29, 2018).<\/p>\n

[4] Jennifer Marks, \u201cThe Battle for Market Share,\u201d Home and Textiles Today<\/em>, (September 4, 2017).<\/p>\n

[5] Bizcommunity, \u201cThe benefits of machine learning for retail,\u201d SyndiGate Media Inc.<\/em>,\u00a0(May 23, 2017).<\/p>\n","protected":false},"excerpt":{"rendered":"

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