Walmart Builds a Secret Weapon to Battle Amazon for Retail’s Future

From The Wall Street Journal:

Epiphany Davis arrived at work in lower Manhattan on a recent morning, consulted her cellphone and set off by foot in search of products ordered via text message by wealthy New Yorkers.

From her company’s loft-like headquarters, Ms. Davis walked to a health food store to get SmartyPants Kids vitamins, but the variety was out of stock. Checking her cellphone often for instructions, she walked to a grocery store for a single bag of Guittard milk chocolate chips. She rode the subway to a Nespresso store for three boxes of coffee pods, then walked to Bloomingdale’s to pick up a $245 navy blue MZ Wallace backpack.

Ms. Davis works for Jetblack, a personal-shopping company targeted at mothers launched last summer by a surprising newcomer to the field— Walmart Inc. A few hundred shoppers in New York City pay $600 a year to order anything by text message except for fresh food. Members were invited by Walmart, or referred by current members, and need to have a doorman to join.

Their orders go to Jetblack headquarters where dozens of agents sit at computers and field requests, from reordering diapers to making suggestions on high-end cribs, organic snacks and yoga attire. Couriers fetch the items and bring them back to a Manhattan delivery hub, where they are wrapped in black packaging and hand delivered, usually the same day.

It’s a labor-intensive operation that loses money. But making money isn’t the goal, at least not right away.

. . . .

Walmart is using Jetblack’s army of human agents to train an artificial intelligence system that could someday power an automated personal-shopping service, preparing Walmart for a time when the search bar disappears and more shopping is done through voice-activated devices, said Jetblack CEO Jenny Fleiss.

“It’s the tech of the future, right? It’s not what everyone is doing today,” said Ms. Fleiss, who previously co-founded apparel rental company Rent The Runway. The CEO said it could be five to seven years before the system is mostly automated and less reliant on humans. “This is a long journey,” she said. “And I think we were aware of that going in.”

Walmart is competing with Amazon, which has $233 billion in annual sales, including web services. In addition to Prime, the online giant has same-day grocery delivery from Whole Foods stores in some cities, plans to open dozens of small physical grocery stores and has sold millions of Echo speakers that let shoppers skip stores and websites altogether, and shop for products or request music with their voice.

Walmart is the world’s biggest retailer by revenue, with $514 billion in annual sales, but e-commerce makes up only a small percentage. That’s out of sync with where retail is growing fastest. Across the U.S., online shopping accounted for 9.7% of total retail sales last year and grew 14.2% from the previous year, according to the Commerce Department.

. . . .

Jetblack is a small piece of Walmart’s online investments, but it is one of the biggest gambles Walmart is making to attract wealthy shoppers and burnish its tech credentials.

Walmart primarily views the company as a research hub on AI and voice shopping. Some pieces of the business “could very readily be applied to the broader ecosystem in time,” she said. Jetblack’s software is learning to make agents more efficient, already suggesting language to use for many text interactions, said Ms. Fleiss.

Jetblack’s goal is that over time, through these interactions, the computer algorithm will learn to respond to requests with humanlike nuance but machine efficiency.

Link to the rest at The Wall Street Journal