Amazon.com has been deemed the next disturber of the technology space. But as the e-commerce leader launches its own tablet device and beefs up its digital content, another retail behemoth is quietly making moves to become the next tech giant.
Tucked in the heart of Silicon Valley, Wal-Mart has assembled a team of 70 developers, computer engineers and researchers — dubbed @WalmartLabs — in an aggressive attempt to position itself at the forefront of social and mobile commerce.
Born from the $300 million acquisition of Kosmix in May, @WalmartLabs is being led by two Amazon veterans, Venky Harinarayan and Anand Rajaranan.
The duo's comparison shopping site, Junglee, which was acquired by Amazon in 1998 for $250 million, has been credited for the success of Amazon's third-party marketplace. Harinarayan and Rajaranan are also the brains behind Amazon Mechanical Turk, a crowdsourcing Internet marketplace.
"I think the difference between online and offline is going to blur dramatically over the next two to three years," Harinarayan told TheStreet. "For example, if I look at a product offline I'd like to see the same detailed page I see online. I'd like to know who else likes this product, what are the reviews, the people who bought this product, what else did they buy."
"And what you expect offline, the whole three-dimensional experience, people are going to want to see that online. So at Wal-Mart we look at this now as a continuous channel. There's going to be one channel—whether it's online or offline, people want to interact in an easy fashion, and it is our job to make it one seamless experience."
Wal-Mart is hoping the two start-up mavens can reinvent its own e-commerce platform, which has lagged competitors. In comparison to Amazon, which raked in $34 billion in e-commerce sales in 2010, Wal-Mart earned just $6 billion.
One of the first steps in narrowing this gap is in revamping Wal-Mart's online search engine, Harinarayan says, with a focus on those categories that were not served well in "e-commerce 1.0."
While Harinarayan says Amazon succeeded in perfecting search for hard goods like consumer electronics and toys, there's an opportunity to replicate this for soft goods like fashion and accessories.
But @WalmartLabs' biggest project will be creating what Harinarayan calls a "social genome." Piggybacking off Facebook founder Mark Zuckerberg's model of "social default," Harinarayan says consumers are going to expect social media incorporated in their shopping experience, both on and offline.
"What we have been looking at is how do we get social in the physical store," Harinarayan says.
@WalmartLabs is prototyping an application akin to an in-store Twitter, which it plans to launch in the next three to four months.
"People can come in and Tweet about what they see and other shoppers or associates can respond to that," Harinarayan says.
"You can say, I really like this product and then people can give their opinions; you can ask where something is in the store and other shoppers or an associate can answer."
"The right model is a dynamic social network — a network of all the shoppers that are in the store at that period of time as opposed to a more static social network which tends to be persistent relationships like friends."
Facebook is also altering the way people shop and @WalmartLabs is attempting to figure out how to use it as a platform for its everyday low prices.
This is where Shopycat comes in. The Facebook application uses social media profiles and comments to generate gift ideas.
"It is becoming clear to us that one of the shopping behaviors that people have that is inherently social is gifting," Harinarayan says. "We are building a product that we believe makes peoples' gifting much more efficient, because all of your friends and family, within reason, are on Facebook. We are leveraging that information to help you buy better gifts and make it easier for you. We believe gifting and social networks are fundamentally made for each other, so getting that right over the next year will be important to us."
Shopycat will launch in time for the all-important holiday season.
@WalmartLabs is also leveraging this social media to assist in store inventory planning and allocation.
"We have questions like, it's now college football season, when should we start stocking products related to college football? If you can start looking at social media buzz it gives you a good sense of when people in your area are starting to talk about college football and that is usually a good time to start stocking products," Harinarayan says.
Utilizing the data from social media can also help Wal-Mart discover the next "it" items.
Outside of @WalmartLabs, the company is also finding a foothold in the growing streaming video market. Wal-Mart's Vudu service allows users to stream movies and television shows a la carte for $1 to $5.99. Wal-Mart has been aggressively advertising Vudu, which it acquired in February 2010 for reportedly $100 million. The company introduced an iPad application in August and has integrated Vudu movies on Walmart.com.
But just how successful can Wal-Mart be in the technology space? Given its sheer size and assets, Janney Capital Markets analyst David Strasser believes Wal-Mart can be a formidable opponent.
Whether or not the discount retailer gets it right remains to be seen, but it certainly has distinct advantages should allow it to take on some of the major players.
"If you look at any company, the most likely disruptor to that business is going to come from Silicon Valley. Whether you are a car company or a phone company, it doesn't matter anymore," Harinarayan says.
"The disruption is around information technology and the fact that your customers are now accessing you through technology. Like it or not, every company has to look at themselves as a technology company. It's far better to be a disrupter than be disrupted. So we are saying, let's go ahead and understand how these mediums are changing things and let's try to win here."
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