Walmart thinks shopping via text might be retail's next big thing
Posted November 8, 2018 12:07 p.m. EST
(CNN) — Walmart thinks that some day you'll just send a text when you need to stock up on cereal and diapers.
In May, Walmart rolled out Jetblack, a chat-based personal shopping service targeted at time-strapped moms in New York City.
Members can text Jetblack when they run out of Cheerios or toothpaste, or need a last-minute gift recommendation for a kid's birthday. Jetblack promises same or next-day delivery with free returns.
At $50 a month, Jetblack is unlikely to have much appeal beyond wealthy shoppers in big cities willing to pay a premium for convenience. But pushing out Jetblack to the rest of the country is not Walmart's long-term goal.
Instead, Walmart (WMT) is betting that Jetblack will give the company insights into "conversational commerce" — shopping through text messages, online chats, and voice commands — that could become the next wave of retail.
Personalized shopping programs are the latest trend in retail. Jenny Fleiss, the CEO of Jetblack, co-founded Rent the Runway before launching Jetblack.
But Jetblack is the first company to develop out of Store No. 8— Walmart's tech incubator. Store No. 8 is tasked with developing companies that will help Walmart stay ahead of shopping trends.
The incubator is the brainchild of Marc Lore, who founded Jet.com and moved over to Walmart when it bought his startup two years ago for $3.3 billion.
Lore is high on Jetblack's potential. "I couldn't be more excited about this one," he said last month at the company's annual investor day.
"Need it. Text it. Get it," Jetblack's tagline reads, playing up its ability to offer immediate solutions to busy shoppers.
The service relies on artificial intelligence and team of buyers to respond to members' text requests with a curated menu of choices pulled from Walmart.com, Jet.com, as well as other retailers like Pottery Barn.
Jetblack membership includes an extensive onboarding process, so the service knows which brands and sizes customers prefer.
Walmart predicts that shoppers may want to buy stuff by text or a simple voice command in the future, rather than browsing through thousands of choices online. The company believes shoppers may not need a separate device like an Amazon Echo either when they already have a smartphone in their pocket.
"People are not going to — 10, 20 years from now — be using search the way they do today," Lore said last month.
Cowen retail analyst Oliver Chen shares that view. "Search bars of today may become like cassette tapes," he predicted in a research report.
To win in a text and voice-shopping future, Walmart will have to deliver accurate suggestions and master fetching products for customers on demand.
Walmart is experimenting early, when conversational commerce is still in its infancy. Building up millions of conversations will help the company develop algorithms to automate service in the future. With automation, Walmart might be able to offer a cheaper version for its mid-market customer base.
The Jetblack pilot has already taught Walmart some valuable lessons about customer habits
For example, Jetblack members prefer text over voice because the service can send them back pictures of products. In about a third of Jetblack's conversations members ask for product recommendations.
Lore said last month that Jetblack is getting better at handling those requests: 79% of the time, members take Jetblack's recommendations.
Instead of going to a store and choosing the right product off a shelf, members are trusting Jetblack to do all the work for them. That's a big responsibility, and Jetblack can't afford to get it wrong.
Jetblack is being trusted for recommendations and has to manage members' high expectations, said Ron Adner, professor of strategy and entrepreneurship at Darmouth University's Tuck School of Business.
Analysts also wonder if startups like Jetblack can mesh with the world's largest retailer.
"If you go to Jetblack, you really have to dig around to figure out it's a Walmart company," noted Evan Neufeld, vice president of intelligence at consulting firm Gartner L2.
That's by design. Companies that emerge from Store No. 8 are shaped by Walmart. A Walmart executive will sit on the board of each of them. But Lore said in October that Store No. 8 companies would be "ring fenced" from the larger operation.
That independence could make it difficult to integrate these companies into Walmart, where a much bigger market and set of demands are at stake.
"This underlines the question of whether and how Walmart will be able to harness the potential success of these startups in its core business," Adner said.