Walmart.com's transformation: Too little, much too late

The biggest obstacle to Walmart.com being successful is Walmart itself

walmart registers
Mike Mozart (Creative Commons BY or BY-SA)

This month, BusinessWeek took a look at how Jet.com is doing in its effort to transform Walmart.com. My conclusion: The biggest obstacle to Walmart.com being successful is Walmart itself.

This is hardly news to readers of this blog, as we have been skeptical about Jet's odds against the Bentonville behemoth and have repeatedly pointed out Walmart getting in the way of its own online strategy.

But as is typical for these BusinessWeek deep dives, it unearths quite a few behind-the-scenes moments. Consider this peek into how Walmart strategy on pricing and third-party sellers, which are ultra-critical to master if Walmart wants any chance of toppling Amazon.

"One perennial source of tension involved prices. Amazon typically sets them using algorithms that scour the web to monitor and match the lowest number they find, which means prices can change constantly on the site. Wal-Mart sets a consistent 'everyday low price' inside its stores. It’s one of the most sacrosanct brand promises in retail, practically inscribed onto holy tablets by Walton himself as a way to assure customers they won’t have to comparison-shop. The philosophy created problems on the web, though," the story said. "Whenever the online price dropped below the in-store price, the merchants in Bentonville would balk. They were worried about siphoning away customers from their stores, which account for more than 97 percent of Wal-Mart’s sales. The company was also hesitant to let outside sellers list their wares on Walmart.com. This marketplace idea generates half of Amazon’s unit sales. It also creates a prodigious amount of unseen internal conflict, since Amazon employees have to compete with third-party sellers who are pursuing the same buyers. But the company tolerates and even encourages the tension because choice and price competition are good for customers. Wal-Mart, accustomed to dominating its relationship with brands and showing its entire assortment in its massive stores, was reluctant to foster such competition, and it didn’t have the technological chops to support an expansive marketplace."

This is all very familiar terrain to anyone who has tracked Walmart over the years. Despite how impressive the technology and the thinking from Jet is — and it's indeed quite good — Walmart is attacking this problem tactically and not strategically.

One of the top reasons Amazon has become so formidable is that it initially had zero physical stores to care about. And the handful of physical stores Amazon has today are there to service and reinforce the online operation. Amazon is an online company that is dabbling in in-store, while Walmart is the opposite.

Walmart's brand attributes are all in-store and it's all about low prices. It's never been about selling high-quality items or providing world-class customer service, and it's certainly never been about delivering a fun and entertaining experience. In short, decades of market positioning has left the chain massively open to an online attack. There's nothing technologically that Jet can do now to reverse all of that.

That's because Walmart will still prioritize its stores. Much has been made about Walmart's ability to cost-effectively ship SKUs to one of its stores, allowing for cost-effective pickup-in-store. But if shoppers don't want to deal with the parking headaches and the crowding and unpleasantness of going to a Walmart store, it's hardly a customer-centric advantage.

The BusinessWeek story also offered this interesting too-little-too-late gesture from Jet CEO (and now Walmart e-commerce chief) Marc Lore: "Instead of evaluating [Walmart managers] entirely on quarterly profit and loss, as Wal-Mart managers have been judged in the past, Lore introduced five bellwethers related to the customer experience, such as whether products are in stock, how easily they can be found on the site, and how quickly they’re delivered."

Without any context, this is a clever and desirable move. But within the context of the Walmart universe, it's unlikely to have any meaningful impact. This is about Walmart trying to be better, but it's not about it offering a better online experience than Amazon. At this stage, it needs to deliver a better interaction than does Amazon or it simply won't work. Indeed, as we approach the middle of 2017, I'm not even sure if that would work, but certainly anything shy of that goal is highly unlikely to do much.

Download the 2018 Best Places to Work in IT special report
  
Shop Tech Products at Amazon