Innovation

Walmart launches new tech startup incubator, as e-commerce war with Amazon heats up

Walmart's Store No. 8 will help the company develop new retail solution with robotics, VR, AR, AI, and machine learning to give the retail giant an edge in e-commerce.

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Walmart is stepping up e-commerce business with a new tech incubator.

Image: Walmart

Walmart is launching a new startup incubator as it pushes further into tech to enhance its e-commerce services and help it better compete with other online retailers such as Amazon.

The incubator, named Store No. 8, will partner with venture capitalists, startups, and academic institutions to develop new retail tech in robotics, virtual and augmented reality, machine learning, and artificial intelligence. It will operate as a separate entity from Walmart to give the new companies a chance to develop without being under the looming Walmart shadow.

The retail giant is busy revamping its e-commerce lineup, which became apparent last summer when Walmart acquired Jet.com for $3.3 billion. This year, Walmart has already acquired popular online retailers ModCloth, Moosejaw, and ShoeBuy, which are disrupters in the online marketplace.

SEE: Walmart buys indie online retailer Modcloth (ZDNet)

This isn't Walmart's first attempt to create innovative tech. It launched @WalmartLabs in 2011 in San Bruno, California to focus on innovation and tech.

The difference now, said Leslie Hand, vice president of retail insights for the International Data Corporation, is that the acquisitions, and Store No. 8, are more about changing how the customer interacts with Walmart.

"I think Walmart has moved from thinking about tech purely as an enabler of innovation inside their business to being the innovation that will drive business. I think that is the key difference. They've had an innovation center in Silicon Valley and they have an innovation facility in Bentonville, Arkansas," Hand said. "I think it's a mind shift that is more about adapting business, but adapting business led with technology that changes, fundamentally, how you deliver an experience to your consumer. Frankly, I think it's what they needed."

Paul Cuatrecasas, CEO of Aquaa Partners, said, he's not convinced the new innovation incubator will make a difference for Walmart.

"The jury is out on that," Cuatrecasas said. "It has traditionally been difficult for established non-tech firms to build successful tech incubators. This is because large organizations, by their nature, tend to have larger levels of bureaucracy, and find it difficult to move fast, allocate resources quickly, and experiment."

There have been a flurry of non-tech companies acquiring tech companies over the past year. In 2015, there were $54 billion in non-tech mergers and acquisitions compared to $108 billion in 2016, Cuatrecasas said.

"Non-tech companies are concerned about the future," Cuatrecasas said. "Tech startups have been starting to disrupt traditional industries, transforming consumer expectations, and challenging business models. For example, in retail, consumers increasingly expect to be able to order something online, and receive it the very next day, or even the same day. Traditional retailers, like Walmart, weren't originally set up to deliver this type of service."

Faced with this competition, many of the large traditional companies are choosing to acquire startups rather than rely solely on building the technology capability in-house. This makes sense because it is quick; it's turbo-charged, he said.

"These acquisitions are also a gamble on the future of the industry," Cuatrecasas said. "The big traditional companies believe, rightly, that if they make the right tech company acquisition, it could lead to a new generation of growth for them."

Three takeaways for TechRepublic readers:

  1. Walmart has a new tech incubator to help it compete with major online retailers such as Amazon.
  2. The incubator will partner with venture capitalists, startups, and academic institutions to develop new retail tech in robotics, virtual and augmented reality, machine learning, and artificial intelligence.
  3. The retail giant is busy revamping its e-commerce lineup, and last summer acquired Jet.com for $3.3 billion.

See also

About Teena Maddox

Teena Maddox is a Senior Writer at TechRepublic, covering hardware devices, IoT, smart cities and wearables. She ties together the style and substance of tech. Teena has spent 20-plus years writing business and features for publications including Peo...

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