By Alistair Barr
December 21, 2011 12:14 PM EST
Wal-Mart Stores Inc has turned to a small group of technology entrepreneurs to help the world's largest retailer improve its online fortunes.
They run a new unit of the company called @WalmartLabs near Silicon Valley which is crunching mountains of data from social networks and riding a wave of smartphone adoption in hopes of capturing more sales for Wal-Mart online.
@WalmartLabs is aggressively hiring software developers and has started what could turn into a string of global e-commerce acquisitions on behalf of the retailer overseen by former Evercore investment banker Brian Roberts.
"The company is putting a lot of resources behind the e-commerce push and wants it to grow quickly," said Roberts. "To look back 10 or 15 years from now and say you were there when the direction of the whole company changed - that's exciting."
Wal-Mart generates more than $400 billion in annual revenue. Yet it is the sixth-largest Internet retailer, behind Amazon.com Inc, Staples Inc, Apple Inc, Dell Inc and Office Depot Inc, according to industry publication Internet Retailer.
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That is a problem because e-commerce revenue in the United States is growing at 10 to 15 percent a year, while revenue of traditional retail stores is growing at about half that rate, according to Van Baker, a retail analyst at Gartner.
Wal-Mart does not disclose online sales, but this part of the company's business likely accounts for less than 1 percent of total sales - or around $4 billion a year, according to Ed Weller, an independent investment and retail analyst. The retailer's online sales are probably growing at a similar rate to e-commerce in general, Weller said.
Annual sales of industry leader Amazon.com, by contrast, are likely to exceed $40 billion this year, according to analysts.
Wal-Mart's e-commerce efforts "are not the best, but they are far from the worst," Baker said. "I give them high marks for understanding the changes they need to make and trying to get them done."
As recently as a year and a half ago, Wal-Mart treated its online operation as a separate business, but the company is now taking a multi-pronged approach, with stores sharing credit for sales when staff encourage in-store customers to order online.
'A GREAT LEVELER'
One of the biggest opportunities comes from combining Wal-Mart's data on purchase history with data from social networks like Facebook and micro-blogging site Twitter.
Transaction history tells Wal-Mart what customers have bought in the past. Social data has the potential to tell the retailer what consumers may buy in the future - information that could be even more valuable.
Through tweets and Facebook updates, marketers have the potential ability to glean details of consumers' interests. Knowing what people like and want can help retailers stock more items that will sell better.
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