Wal-Mart (WMT, Financial), the world’s largest retail store chain, has been reeling under pressure for a very long time from the e-commerce segment. It had tried to explore every trick of the trade but could not salvage itself from the dwindling traffic at its stores. After a lot of error and trial, it is finally walking the tech path.
The retail giant has been suffering heavy losses and had to close quite a number of locations. It took a shot at a number of options to lure consumers back, but none of them really made a big impact. This is not the story at just Wal-Mart, but pretty much the same across all retail outlets. After Amazon (AMZN, Financial) took the retail sector to the doorsteps of the consumers, the gap between brick and morter stores and consumers has been widening like never before. Wal-Mart is all set to take up a new experiment with technology in order to buy back the customers from e-commerce peers. Let us take a peek at what is cooking up at Wal-Mart.
The Tech Move
Stuck trying to find a gift for your mother-in-law, or that 16-year-old niece? Wal-Mart labs have been liaising with social networking giants like Facebook (FB, Financial) and Twitter (TWTR, Financial) in developing an application that will use publicly available social media data to define a gift of choice for a particular person.
The user needs to just go to facebook.com/shopycat and download a small application onto their computer. It will review your Facebook friends’ data and look at their hobbies, interests and activities and map a consumer pattern for them by identifying their trends and create a list of gift suggestion. You can search for recommendations by name or by interest, review the suggestion and click to buy a gift.
Anand Rajaraman, senior vice president at Wal-Mart Global eCommerce, further explains:
“For example, Shopycat notices that my friend Joe keeps posting about the Red Sox, and infers that he is a Red Sox– and therefore, a baseball — fan. Shopycat analyzes likes and shares to infer tastes as varied as Harry Potter, running, Angry Birds, sushi, yoga, and parenting to recommend gifts.
The second step is to search across a large universe of products to find the one "wow" gift that doesn’t burn a hole into your pocket. Shopycat matches users’ interests to a giant catalog that includes products from Walmart.com, Wal-Mart stores and sites including Barnes and Noble (BKS, Financial), RedEnvelope (REDE, Financial), ThinkGeek (GKNT, Financial), and Hot Topic (HOTT, Financial). Rajaraman further illustrated that “Walmart understood it didn’t necessarily have the best selection of potential gifts, so it partnered with other retailers. Before tools like Hadoop were available to work with big data, using information from social media would have been difficult, if not impossible. Now Facebook, Twitter and other sites including Flickr, have changed the sources of information available to retailers. No longer is a retailer limited to monitoring the actions of shoppers on its site or in its stores. Walmart can watch social media for trends, such as the rise in popularity of the English singer Susan Boyle as it was happening, so buyers can make sure they have the right music in stock for those who still buy CDs.”
The Thought behind the New Move
Rajaraman, a noted entrepreneur and venture capitalist investor in the Silicon Valley, holds immense experience in developing technology to understand and predict consumer sentiments and purchasing patterns from social media platform at Kosmix, a company he co-founded with Venky Harinarayan. It developed a tech analytic platform called the Social Genome to organize and predict using huge data silos from status updates, tweets, blogs and videos. Walmart bought the company nine months ago along with its 60 employees and formed the Walmart Labs, an attaché to the Walmart e-commerce operations. Rajaraman, who sold his comparison shopping company Junglee to Amazon in 1996 for $250 million, is now focusing his technology prowess in using the social media technology developed at Kosmix to help Walmart counter the threat from its e-commerce peer Amazon.
One of Rajaraman’s blog illustrates “when I tweet “Loved Angelina Jolie in Salt,” the tweet connects me (a user) to Angelia Jolie (an actress) and SALT (a movie). By analyzing the huge volume of data produced every day on social media, the Social Genome builds rich profiles of users, topics, products, places, and events. So if his friend remarks on Facebook that she loves Salt, Shopycat will understand this is a prompt to suggest a DVD, rather than a salt grinder, for a birthday present.”
It seems like a huge amount of data for Wal-Mart to get its hands on, and might cause a notion amongst consumers that now Wal-Mart will also join the league of scores of retailers annoying consumers with pesky marketing calls and offers. However, Rajaraman clarifies the company's stand by saying “We don’t use it for any other marketing purposes.” Moreover Wal-Mart will be using only information that is publicly available on Facebook, Twitter and other social media sites.
Our Take
The obvious question after going through all the facts is whether this will salvage Wal-Mart from the onslaught that it has been facing from retailers like Amazon. That is something that only time can clarify. However, the new technological initiative will certainly boost the dull performance of the retail giant as it indicates that now even the world’s largest retail store is taking cognizance of consumer trends and moving on to the online version of retailing business rather than the conventional retail outlet based business. From the investors point of view this should be a welcome move from Wal-Mart and they should hold on to their current holdings in the company and wait to observe how this new tech initiative works out for the retail bigwig in the long run.
