NEW YORK — Wal-Mart’s Store No. 8 has its eye on the future.
According to Sharat Alankar, Store No. 8 is a technology incubator for Wal-Mart, and helps with what the company should do or consider when members of the c-suite formulate plans for evolving the discounter. Alankar is an associate at Store No. 8, which is headed by Katie Finnegan and Seth Beal.
Alankar spoke at the ninth annual Retail Summer School at Columbia Business School here on Wednesday. The program was hosted by ICR, former retail analyst Richard Jaffe and Shoptalk. Jaffe is now a professor at the business school.
Alankar said the team was set up after Wal-Mart acquired Jet.com. He joined Wal-Mart as part of the Jet.com acquisition.
The group was given its name as a nod to Sam Walton, who used his eighth store as a test for new ideas, such as use of computers in the store. It also fits the parameters of the idea behind its formation, which is to serve as a laboratory of sorts for ideas about the future of retailing.
“We are tasked with looking at business models three, five, seven, maybe 10 years out. The core Wal-Mart [part of the organization] is focused on running the business now,” Alankar said, noting the recognition by executives that the company needs to invest now for the next five years.
He said they are looking at technology and trying to determine what are the “hot buttons” that will contribute to retail down the road, adding that the AI and all its variants, robotics, virtual reality and 3-D printing on demand are just some of the topics being explored. “We are also looking at how this will help Wal-Mart with their supply chain on the operational side,” he said.
Alankar, who doesn’t like the way the word omnichannel is used, said one should think of the store as a way to access the customer, as well as a mini-distribution center.
He said the group is also keeping tabs on everything, from acquisitions to companies that might be considered for incubation by the discounter and even whether certain opportunities should be acquired versus just working with them as a strategic partner.
As an indication of how open the discounter is to what it might need to be competitive, Wal-Mart is also listening to ideas from its employees at different levels, from upper management to the store associate. He said the idea of having store associates deliver purchases on their way home could have been an “idea from an associate in a store” to make some extra money on the way home.
The program’s all-day agenda was focused on the changes at retail, and what else could be coming down the pike.
Among the highlights, Dave Bassuk from AlixPartners said so far there have been 5,341 store closures year to date, with about two-thirds due to bankruptcy filings. He said the successful retailers are the ones that are flexible and willing to change their business model to adjust to the changing landscape. And while traditional retailers like to order enough inventory so they are never out of stock, Bassuk suggested that they take a lesson from the off-price and fast fashion retailers — “flip the model upside down and focus on much smaller buys.” That way they buy enough to sell through, and don’t have extra on the shelves when the season is done.
John Howard of Irving Place Capital noted that it has become much harder to identify a good investment, as well as make a return on that investment.
Howard said what made for a good investment in the past is a”historical artifact” in today’s world. His example was Aéropostale, which he said was a $6 million investment that was later sold for $800 million. The company grew from 118 stores to 1,100, but that metric is “unrepeatable. Today 1,100 stores is seen as a liability, not an asset,” Howard explained. That has changed how private equity needs to think if they are investing in retail and apparel. “Part of the role of private equity is to be a catalyst. We move in and make changes. It’s more like a workout than an investment,” he said.
A couple of start-ups — they either are part of the XRC Labs accelerator or have been in the past — also presented at the conference.
One was Marleen Vogelaar of Ziel, which has a platform to help smaller firms such as yoga studios design and manufacture activewear apparel on demand. “There is no minimum order, and delivery is within 10 days,” she said. Vogelaar was also the founder of 3-D printing service firm Shapeways. Ziel helps with the design, manufactures the product and then drop ships to the customer. She predicted that technology in a few years will probably evolve so that about 25 percent of the merchandise on sale will be made on demand.
Alexa Fleischman, cofounder and chief executive officer of Strypes, a personalization platform, also presented. “Personalization is how you compete with Amazon as now the product is no longer a commodity,” she said. The Strypes platform is a turnkey solution that can make product in real time. She also said data indicates that 20 percent of consumers are more willing to pay extra for something that is personalized.