Bentonville to Silicon Valley: Walmart Thinks Like a Start-up

This Most Connected Company adds tech acquisitions to its expansion plans.

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Liebmann, the consultant, predicts it will be difficult for Walmart to leapfrog Amazon given the online retailer's head start and popularity. Walmart has some advantages, however, including a massive customer base, in-store pickup of items ordered online, and fresh groceries that Amazon doesn't offer. Walmart can succeed if it "use[s] digital to enhance the stores—and vice versa," she says.

A quick review of customer stats reveals why Walmart, the world's largest retailer, is pouring resources into e-commerce. There are 1.5 billion visits to its website each year, and one-tenth of its global customers shop the chain online. Underscoring the growth potential, Kantar Retail estimates that U.S. online sales for Walmart were $3.66 billion in 2010, rising to $4.36 billion in 2011—a 19 percent increase.

Rising sales have also prompted some spending. Walmart's April 2011 acquisition of Kosmix, a company that analyzes social media to improve e-commerce, for a reported $300 million gave birth to @WalmartLabs. Kosmix, based at the time in Mountain View, Calif., was cofounded by Harinarayan and Anand Rajaraman, who now holds the same titles as his colleague at @WalmartLabs.

After selling an earlier company to Amazon in 1998, the duo joined the online retailer and played key roles in its expansion. It's the sort of expertise that Walmart wants to harness in its battle against Amazon, a rival that has reportedly successfully outbid Walmart for other new ventures.

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Barely a year old, @WalmartLabs is on a high-tech shopping spree. In 2011, it acquired Boulder, Colo.-based OneRiot, a start-up that targets ads to social media, and Sydney, Australia-based Grabble, which designs technology that enables in-store purchases with mobile phones. In January, @WalmartLabs bought another start-up: Portland, Ore.-based Small Society, a developer of mobile apps. Walmart is also awaiting approval from Chinese authorities to become the majority owner in Yihaodian, a leading e-commerce site that would expand the chain's footprint in the world's most populous nation.

@WalmartLabs has been likened to a nimble startup within a lumbering corporation, raising questions about its ability to have an impact. Harinarayan dismisses the concerns, emphasizing that his lab has strong backing from the CEO on down, and free rein to experiment. "We really are looking at keeping the startup, entrepreneurial culture alive—that's very important to us," he says.


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