Katie Finnegan

Store No. 8 operates like a start-up — one that just happens to exist inside the world’s largest retailer.

The innovation hub has been tasked with developing ideas that could have a transformative effect on retail at a time when emerging technologies are influencing all aspects of consumers’ lives. Other retailers and shopping centers have integrated the search for new technology into their operations, creating labs and hiring chief digital officers. But none have the deep pockets of Wal-Mart.

“From the top down, this [technology] is a huge priority,” said Katie Finnegan, Store No. 8 principal and vice president of incubation, Wal-Mart e-commerce. “We’re very highly visible to Doug [McMillon, president and chief executive officer of Wal-Mart Stores Inc.] and Marc [Lore, president and ceo of Wal-Mart U.S. e-commerce, and founder of Jet.com]. Whenever we have an idea, we pitch it to Doug and the board. We say, ‘This is a concerted effort. We’re going to make a move on this.’ After we get the go ahead, we don’t have to keep in touch with the Mother Ship.

“It’s hugely important for us to consider virtual reality, augmented reality, artificial intelligence and robotics,” said Finnegan during a discussion with WWD deputy managing editor Evan Clark. “We’re creating a perspective of how these will impact the business model and doing a thesis.”

Wal-Mart has a road map to help guide the innovations it brings to market to scale over the next 18 months, though Store No. 8 has a much longer outlook. Its technologies are three to seven years away. Wal-Mart said it’s learning that new ideas can thrive outside the constraints of short-term process and profitability.

“We’re looking at where it makes sense for us to start investing,” Finnegan said. “We want to be the market leader so we’ll build out the infrastructure.”

Store No. 8 is incubating five to 10 ideas, which are at various stages of development. “We hope to create operations strategies for the Mother Ship,” Finnegan said. “The technologies have store operations implications and will impact customer experience. We’re pretty near with AR. We say robotics is really cool, but we have to create a business case before we move forward. We’re not doing technology for technology’s sake.

“It really depends on the size and scale and value proposition to the customer,” Finnegan added. “We’re not going to move the needle unless whatever we build has a path to Wal-Mart. Operational efficiencies will move the needle. If we can make a more efficient supply chain, just a 1 percent change will have a huge impact.”

Finnegan, who worked in merchandising positions at J. Crew and Jet.com prior to its acquisition by Wal-Mart, admitted, “I learned that I didn’t appreciate scale. Wal-Mart has 2.3 million associates. Its $3.3 billion acquisition of Jet.com was so small it didn’t have to be disclosed. Whatever we build, the path has to be to Wal-Mart.”

Computer vision and AI will remove friction from certain aspects of shopping, Finnegan said. “Companies normally address technology from a return on investment perspective,” she added. “With self check out and scan and go, the checkout time is the friction. The return on investment is easy to pencil out.”

VR is still five years away from adoption by a critical mass of consumers, Finnegan said. “Certain technologies are better as an ecosystem, where all retailers are on board and it excites the customer and fuels adoption. VR is super-expensive. When the technology catches up, we think VR is going to be even more impactful.”

But that doesn’t mean Store No. 8 isn’t moving forward with VR. “We’re excited about it,” Finnegan said. “With VR, content is king. Where we wanted to play was in emotional content and experiences. Specialty retailers such as Bonobos and Modcloth [both now owned by Wal-Mart] can have an emotional connection with VR. We met over 200 companies and realized that [the retail industry] hasn’t incentivized technologists. They’ve been working more on gaming.”

To remedy that, Store No. 8 and Arianna Huffington’s Thrive Global created Innov8: V-commerce, a competition to discover immersive retail experiences. After a nationwide open call in July went out to the VR developer community, the top ideas for changing the way people shop and live, were chosen and will be on display at an invitation-only exhibition on Oct. 18 in Los Angeles.

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