Walmart’s two different worlds and the impact on its war against Amazon

Two different worlds of Silicon Valley and Bentonville

 “….The episode illustrates a broader culture clash at the world’s largest retailer, one that pits its Bentonville, Ark., headquarters against the coastal outposts that manage most of its online business.”            -excerpt from a Bloomberg BusinessWeek article

The incident explained before the above excerpt in the Bloomberg article is about how executives in retail and eCommerce worlds of Walmart have different views of the world. The link of the full article is here: Bloomberg

For Walmart, having these two different worlds within the same organizational umbrella means that there are…..

…..Two different islands of Strategy planning and Analytics as well

So I know folks who lead Analytics and planning teams at Bentonville and I also know people who lead planning and analytics teams at the eCommerce division in Silicon Valley. And the amazing, confusing and true fact is, there are lots of redundencies in analytics focus in these two organizations that exist within the same umbrella organization….and not enough collaboration. Every analytics team that you can think of like Network optimization, Inventory optimization, Logistics and Transportation optimization- there are seperate teams in Bentonville and Silicon Valley.

Many would argue that this seggregation makes sense since Walmart.com functions primarily as a seperate entiy. But in my mind, that itself is a thought process that undermines Walmart’s challenge to Amazon. Walmart CAN NOT and SHOULD NOT seperate as two seperate entities of eCommerce and conventional retail. Because despite all the hoopla around eCommerce and everything online, in Walmart’s case……

…..Walmart’s greatest weapon against Amazon is……its stores and its efficient retail network !

Walmart is the only retailer with the resources to battle Amazon. However, for any retailer, even for Walmart, my suggestion always it:

Do not go against Amazon as an eCommerce entity or as many fashionable suggest, a Technology company. It is not a winnable war anymore if you follow that approach.

Back in December of last year (Dec 4th ), I published a post on my blog that highlighted the fact that retailers need to leverage their footprint efficiently to compete against Amazon. The link to the article is here: Bricks and Clicks

A couple of weeks after that (Dec 21st), WSJ published an article, essentially validating the same hypothesis, using Walmart specifically as an example: Walmart’s secret weapon

When combined strategically with its eCommerce initiative, Walmart’s retail footprint of Supercenters can create a fulfillment network that Amazon will find difficult to compete with.

However, note that in addition to the physical infrastructure, Amazon excels due to its technology platforms and algorithms- basically the Science of Supply Chain. Of course, there is a huge cultural aspect as well – Amazon leadership hates legacy frameworks and think about everything from the scratch.

Combining the science of eCommerce planning with the most efficient retail network on the planet

As mentioned above, the first thing thet Walmart and many other retilers pitched against Amazon need to do is to stop seeing the war as an eCommerce war. It may be too late to compete with Amazon in an eCommerce avatar. Now coming back to the specific example of Walmart- the eCommerce division has injected some significant Science in its Silicon valley teams. Some world class tech and algorithms are being built there but the need is to”

Combine that science with retail efficiency superpower

It is critical to make the Analytics leadership at these two entities think and plan as “One Brain and one soul”

Now I will keep this at a high level in terms of what should be the key steps that Walmart needs to do to create an integrated Supply Chain strategy, planning and analytics approach:

Step 1: Draw a clean slate network, a hypothetical network, that if existed, could beat Amazon. Capture the granulatities of that network in terms of key parameters like:

  • Physical infrastructure
  • Digital capabilities
  • Talent

Step 2: Compare this “dream” inftastructure/capabilities, with the current state, combining eCommerce and conventional retail capabilities. What Walmart may find is that many of the capabilities may exist in either eCommerce or conventional retail network- but are not integrated and hence not supporting an overall entity.

Step 3: Perform a detailed gap analysis. An example would be that if eCommerce division has an algorithm to determine the most optimal way to place inventory, can that algorithm be combined with:

(1) An expert system developed in conjunction with retail managers who know the regional product positioning and flows better

(2) The supercenter footprint to evaluate stocking at these locations for extremely expedited filfillment (like 2 hours)

This is a very generic example on purpose. I have some very specific examples in my mind but this is just to illustrate that a detailed gap analysis document will highlight the integration opportunities between eCommerce and legacy retail, not only in terms of retail footprint utilization for eCommerce but leveraging eCommerce planning advanced algorithms for retail by making appropriate modifications.

Step 4: Evaluate the drivers behind the current silos for instances where integration is identified in Step 3. List them under various buckets like:

  • Cultural
  • Talent accquisition
  • System integration issues (legacy with cloud platforms)

Step 5: Develop a detailed plan to overcome the issues identified in step 4. Now this itself in itself is so comprehensive that an entire book can be written so I will leave it at this.

Conclusion

As mentioned in one of the sections above, at this point, only Walmart has the potential to give Amazon a run for its money. However, in order to do that, Walmart will have to make some major changes to its playbook. While everyone suggests that retailers should think like technology companies to compete with Amazon- I will say Walmart should think like a company that is starting from a clean slate, but has the resources to put together a network quickly on that clean slate.


 

Views my own.

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