The Goliath’s are struggling against the David’s. The next 5-10 years will yield some fairly fundamental answers about how large parts of our economy will be shaped. The status quo is no longer. It’s happening in the automotive sector and its also happening in the retail sector, at least to an extent. The automotive sector is being turned on it’s head by advances by nimble tech company players that have shown the legacy industry OEM giants a thing or two over just the past five or so years. The giants are doing their best to adapt and adopt but it’s proving to be a struggle, the culture and creativity match isn’t quite right. That said, they are making strides and some sort of equilibrium will be forged, but clearly the nimble tech types will have a driver’s seat role, unlike the typical OEM-supplier relationship. There will be new automotive OEM-like players that have never existing before. Tesla is but a taste, there’s a lot more where that came from.
On the retail front, Amazon gained such a huge lead with early establishment of an effective e-commerce business model. At least in the non-Asian marketplace, the others of that era weren’t effective and have mostly fallen away. With the exception of some reasonably strong niche players, either by retail segment or by geography (at least from an outside of US perspective) few have survived. Still the largest retailer in the world by revenue, Walmart hasn’t indicated it is ready to relinquish it’s status to Amazon or anyone else but it still hasn’t quite found the formula to drive the e-tailing segment.
And Amazon itself continues to evolve – their announcement today about the acquisition of Souq.com which provides them a much needed beachhead for Middle East markets is important. Generally, Amazon has preferred to grow organically and not by acquisition, but it has shown a willingness to use acquisitions (in China for example) to fuel its “emerging market” strategies.
This article in the New York Times describes how Walmart is further investing in a new investment arm that will enable the firm to experiment – investing new technologies, new start-up companies and also creating strategic partnerships. As well, Walmart has created “walmartlabs” which has been functioning as its internal research and development group. Known as “Store No.8” as a reference to Walmart’s early retail experiment roots, the new investment arm will be focusing on generating cutting-edge collaborations with entrepreneurs, with an emphasis on artificial intelligence, autonomous vehicles and other emerging technologies.
We think that Walmart will figure this out – they have the depth to invest in creative solutions and the staying power to challenge the likes of Amazon. Few others do really, and we suspect that over the next 18-24 months that this space will get a lot more competitive.
Walmart Expands Its E-Commerce Ambitions With a New Investment Arm
SAN FRANCISCO — The purchase of Jet, an upstart e-commerce venture, for $3.3 billion last summer was meant to give Walmart, the nation’s largest retailer, a way to transform its online retail strategy.
Now Walmart is expanding its e-commerce ambitions, and it has tapped a Jet executive to help it build new start-ups within the company.
Walmart announced on Monday that it had formed Store No. 8, an internal venture meant to hatch new online retail businesses.
It is the latest sign that Walmart is trying to revamp its e-commerce playbook. That effort began in earnest last year, with the acquisition of Jet. And last week, Walmart struck a deal to buy ModCloth, an online purveyor of trendy women’s clothing.
Behind the strategic shift has been a recognition that Walmart, long dominant in the world of physical retailing, has fallen far behind in the business of selling goods online — and particularly far behind Amazon.
Many big companies have internal venture arms. And Walmart already has an internal research lab, @walmartlabs, that has focused on developing new e-commerce applications for the retailer.
But Store No. 8 is the first incubator or investment arm of its kind at Walmart, which has a market value of $213 billion
The new venture takes its name from an early Walmart store, built in an old bottling plant, that the company founder Sam Walton used to try out new retail strategies.
“We knew we needed to keep investing in the future of retail,” Seth Beal, one of the principals of Store No. 8, said in a recent interview. “We’re making sure that we make the right short-term decisions but don’t neglect the long term.”
“When the mother ship is ready, we’re sort of ahead of the eight ball,” Ms. Finnegan said. “Our goal is to have whatever we work on integrated into the mother ship.”
Store No. 8 is somewhat like corporate venture arms at other companies and will be charged with identifying emerging technologies that could prove useful. But rather than simply taking stakes in existing ventures, the new division is intended to help create new start-ups. It will also strike strategic partnerships with other promising young e-commerce companies.
Along with incubating new ventures, Ms. Finnegan said, Store No. 8 will be able to draw on Walmart’s resources to support any start-ups that it launches.
Mr. Beal and Ms. Finnegan declined to comment on how much money Walmart would commit to the new venture, saying that Store No. 8 did not have a set goal for money to deploy in its investing.
