Responding To Pressure From Amazon, Walmart Invests Billions In E-Commerce Revamp

By Christine Kern, contributing writer

Critics say move won’t be enough to overtake Amazon.

Walmart has been investing billions of dollars to revamp and improve its ecommerce capabilities to better compete with Amazon.  Since 2012, the project – dubbed Pangaea – has reworked the retailer’s website and built new cloud infrastructure, data centers, and a search engine, all in the hopes of luring customers away from their online competitors.

Jeremy King, chief technology officer of Wal-Mart’s global e-commerce operation,  told the Wall Street Journal that Pangaea was a chance to rearrange the world’s biggest company. Mr. King’s team has basically rebuilt the retailer’s ecommerce capabilities from top to bottom, including how the website works and looks, underlying transaction software, databases and servers, and the backend data center tools to manage it all. The team also built new cloud infrastructure and data centers and wrote its own search engine.

“Pangaea replaces everything,” says Mr. King, in an interview. “My peers, they think I’m out of my mind. Most people don’t replace entire systems in one shot, especially with from-scratch development,” he says. “But given how rapidly this place is changing, we didn’t have time to screw around.”

As part of project Pangaea, Walmart has acquired 15 tech companies and employed more than 3,600 tech employees at its Silicon Valley center. Walmart also recently announced that it would open its OneOps cloud-storage solution to the public, making it easier to move data between cloud systems, an answer to Amazon’s formidable cloud operations, which support much of the web.

In 2014, Walmart CEO Doug McMillion credited Amazon with leading the world in innovations, stating, “Clearly, Amazon is teaching the world what’s possible,” though he also asserted that brick-and-mortar stores were not going anywhere. 

According to Nielsen, e-commerce will gain more ground than any other segment of the retail industry by 2017, with a compound annual growth rate of 11 percent each year. Supercenters come in second, with their growth rate projected at only about half that of web shopping. And sales for consumer packaged goods online — food, groceries, everyday items — are almost 20 percent, the chief source of Walmart’s drive to build ecommerce.

But some critics say that Walmart can’t beat Amazon at the ecommerce game.  According to Digital Spark Marketing, Walmart faces six obstacles to winning the battle for online customers:

• Amazon’s singular focus on ecommerce.
• Logistics and delivery. While Walmart is a king when it comes to logistics, Amazon dominates with its delivery services. 
• Agile innovation. Amazon has always thought like a start-up innovation company, allowing it to be creative and fresh; Walmart tries to think like a start-up with the Walmart Labs division, but the legacy business and its mindset are weighing the innovation down.
• Customer set differences. Walmart is handicapped by its demographics, a quarter of whom do not use debit or credit cards or even have a bank account. 
• Existing in-store strategies.
• Technology lead. Basically, “Walmart must transform itself into an invisible personal shopper to help customers navigate its vast inventory.”

Ultimately, Digital Spark Marketing concludes, “At the end of the day, Walmart’s rise to online dominance really just revolves around turning an otherwise complicated shopping experience into one that feels quaint and easy. It can accomplish this by setting up a strong behind-the-scenes infrastructure that puts the customer experience at the forefront.”