One of the ways Wal-Mart Stores  became the largest retailer in the world was to simply open stores wherever it could. But with the number of locations available to it in the U.S. finite and shrinking, the next logical frontier to conquer is one without physical limitations: Cyberspace.
Thus over the past few years Wal-Mart has been stepping up its emphasis on connecting to shoppers through digital means — its website, mobile apps for smartphones and the iPad tablet, and social media. But the ultimate scenario is one in which the consumer effortlessly navigates between digital formats and the physical store.
“Our goal is to be there for the customer,” said Amy Lester, spokeswoman, Walmart eCommerce. “We’re doing this by bringing together online, mobile, social and our physical stores in a seamless way that gives customers ‘anytime, anywhere’ access so they can shop however and whenever they want.”
Mike Duke, Wal-Mart’s chief executive officer, said at an investment community meeting this month that the company wants to “do it the way the consumer wants” — via the integration of e-commerce and in-store shopping — “not the way we’ve tried to drive them.”
This multichannel shopping approach stands in stark contrast to the generally accepted view of Wal-Mart as ‘just a big-box retailer,’” noted Lee Holman, lead retail analyst for the IHL Group, Franklin, Tenn., which analyzes retailers’ investments in technology.
While Wal-Mart has been continually upgrading its website, www.walmart.com  for some time, the company made its largest leap into digital commerce in April of last year with the acquisition of Kosmix for an estimated $300 million, and the simultaneous creation of @WalmartLabs, Mountain View, Calif., which has become its primary incubator of digital strategies.
The vision of @WalmartLabs is to “make buying and merchandising better and smarter by using signals — different sources of information on what the consumer intends to buy,” said Anita Balaraman, principal product manager, @WalmartLabs, during a panel discussion at the GS1 Connect conference this month in Las Vegas.
Another notable move was Wal-Mart’s hiring in January of Neil Ashe to be president, global e-commerce, and executive vice president. Ashe was previously president of CBS Interactive. “In our view, this hire showed the importance that Wal-Mart is placing on its global e-commerce business,” said Citigroup in a report on Wal-Mart’s 2012 shareholders meeting this month.
Tapping high-level executives seems to be a key part of Wal-Mart’s e-commerce strategy. Following the Kosmix acquisition, all of that company’s employees, including its founders, e-commerce pioneers Venky Harinarayan and Anand Rajaraman, joined @WalmartLabs.
On a Roll
@WalmartLabs “hit the ground running” last year, wrote Deborah Weinswig, retail analyst for Citigroup, New York, in “Weinswig’s Deep Dive: Retail Technology,” published in January. The Kosmix platform immediately enabled Wal-Mart to filter and organize content in social networks in real time to connect consumers with information that matters specifically to them.
“By monitoring a consumer’s interests on Facebook, Twitter, Linkedin, etc., Wal-Mart is able to provide more finely focused recommendations,” said Holman. “This essentially eliminates the myriad extraneous returns from a simple Google search.”
Armed with the Kosmix technology, @WalmartLabs proceeded to acquire Grabble, a mobile POS developer, and One Riot, a social ad network, and release Shopycat, an app that uses social media analytics to recommend products. Shopycat’s gift finder allows consumers to find gifts for friends and family using Facebook. The app has 150,000 installs with an average user session of five minutes (up to 15 minutes during holidays), said Wal-Mart spokeswoman Lester.
Last November, @WalmartLabs launched its first iPad applications as well as updates for its iPhone app. In January, the Wal-Mart division bolstered its mobile efforts with the acquisition of Small Society, a developer of mobile apps.
A recent update to Wal-Mart’s iPhone app is an in-store product location feature expanded to all stores and thousands of products across consumables, grocery, toys and other items. Another new feature is an “in-store mode” that allows scanning of product bar codes to check prices or of QR Codes to learn more about products and special offers, as well as access to the local-ad product list and store information.
Wal-Mart’s “Endless Aisle” feature lets shoppers obtain out-of-stock items via their smartphone by scanning a QR code to access the full inventory and ordering the product for delivery to the store the next day. At home, shoppers can create lists through a new tool that enables them to select the store they visit most often and scan, type or speak items they want to buy, said Citigroup; the app pulls the price for each item on the list and calculates the total cost.
The iPad app has also been updated to allow browsing the local ad, tapping on advertised products to view more information and buy online or in-store, and accessing product recommendations.
Last month, @WalmartLabs completed the “Get On The Shelf” program that allowed the public to vote for products they wanted to see sold by Wal-Mart. More than 1 million votes were entered at www.getontheshelf.com  for 4,000 entrants who submitted videos for products ranging from household wares and children’s toys to organic food and green items. The three winners — HumanKind Water, PlateTopper and SnapIt Eyeglass Repair Kit — will be available at Walmart.com, and HumanKind Water will also be on physical shelves in select Wal-Mart stores soon.
Low Sales Base
For all of its recent e-commerce efforts, Wal-Mart remains at a low base of online sales. Citigroup estimated that Wal-Mart’s online sales in 2011 were 1% of total revenues — in percentage terms more than conventional grocers such as Safeway  (at 0.4%) but less than competitors like Target  (2.1%) and Costco  (2.4%) and well below department stores like JCPenney (8.9%) — leaving “a significant opportunity” for growth. (Kantar Retail, London, recently put Wal-Mart’s online share of sales at 2%.)
IHL’s Holman concurred with Citigroup’s expectations for Wal-Mart’s online sales, which he estimated to be $9 billion worldwide, a distant fourth place behind Amazon’s $48 billion. “Wal-Mart doesn’t like to be ranked second in anything,” he said. “We expect to see that $9 billion number get eclipsed quickly.” He pointed out that most of Wal-Mart’s online revenue comes from the U.S., U.K., Canada and Brazil, “but keep an eye out for China as they take a larger [51%] stake in [online retailer] Yihaodian.”
In terms of food sold online, Walmart.com offers a wide array of packaged products on www.walmart.com, but not fresh foods like loose produce or refrigerated meats. Last year, however, Wal-Mart launched “Walmart To Go,” a limited test of online grocery delivery that includes the city of San Francisco and most cities on the peninsula between San Francisco and San Jose. The test allows customers to visit Walmart.com to order groceries and consumables found in a Wal-Mart store — fresh produce, meat and seafood, frozen, bakery, baby, over-the-counter pharmacy, household supplies and health and beauty products — and have the items delivered to their homes. Shoppers can opt to pick up online orders in stores or at Fedex locations, and receive text alerts when orders are ready.
Wal-Mart may also be looking at Asda, its U.K. subsidiary, which has a full online grocery program that “is considered adaptable to the U.S.,” said Bernard Sosnick, an analyst for Gilford Securities, New York. “That is why tests are being conducted [in the U.S.].”
A recent innovation is “pay with cash,” launched in late April, which lets customers purchase items at Walmart.com and pay with cash at all U.S. Wal-Mart stores, including Neighborhood Markets. With this program, Wal-Mart is the “first major retailer to offer online purchases without need for banks, credit, debit or prepaid cards,” said spokeswoman Lester. Already, she added, cash orders represent 2% of online sales, and nearly 30% of cash customers are new to Walmart.com. In addition, online basket sizes are 50% larger when customers use cash; baby products are among the top-selling online items purchased with cash.
While Wal-Mart stresses the integration of its store and digital strategies, each would appear to be catering to differing shopper types, noted Holman. “In some circles, the prevailing caricature of a Wal-Mart shopper is that of someone who tends to be unsophisticated,” he said. “The embracing of technologies associated with mobile/social/ec-ommerce, however, is aimed at customers who have at least a modicum of technical know-how.” From that standpoint, he concluded, Wal-Mart is striving to reach “a broader range of customer.”
That notion was buttressed by a recent Kantar Retail pricing study suggesting that shoppers at Walmart.com were willing to pay 7% higher prices for edible grocery, non-edible grocery, HBA and GM items than shoppers at a Wal-Mart Supercenter. (Amazon.com shoppers paid 20.5% more than Supercenter shoppers.)
On the other hand, Wal-Mart shoppers may not be that far behind more digitally savvy consumers. Balaraman of @WalmartLabs said about 40% of Wal-Mart shoppers use smartphones, compared with 49.7% of U.S. mobile phone subscribers, according to Nielsen.