Walmart’s Store No. 8 Will Have Five Ventures Up and Running By 2019

Walmart’s incubator Store No. 8 has launched three startups thus far, with plans for two more in the next year or so, said the company’s head of corporate strategy who also oversee the venture at the National Retail Federation’s Big Show in New York on Monday.

Lori Flees also said the mission of Store No. 8 for Walmart is to get ahead of the curve on retail innovation and disruption, before someone else – Amazon, anyone? – gets there ahead of them.

“I don’t think it was just Walmart’s size that enabled us to do it,” Flees said. “It came down to senior leadership team taking the view of being where retail is going over the next 20 years and which areas we need to lead in so we can disrupt rather than have others disrupt us. We need to be disrupting ourselves and our business, leaning into those technologies that will disrupt earlier rather than later.”

Flees also said Store No. 8 has been purpose-built to get new, innovative technologies to market faster by providing adequate, dedicated funding and resources from the parent organization. “We’re set up to move as quickly as a startup,” she said.

While luring top innovation talent and entrepreneurs was originally thought to be one of the biggest challenges facing Store. No. 8, it’s proven easier than originally thought, Flees said. It probably helps, too, that the venture is located in San Bruno, CA, in the heart of Silicon Valley, not in Bentonville, AR.

“When you get entrepreneurs who are passionate about disruption, particularly in retail, and give them the ability to scale within an existing company with lots of data, customers and a footprint to deploy innovation, it’s incredibly exciting for them,” Flees said. “We’ve been pleasantly surprised at the CEOs we’ve been able to attract. A lot of them are coming to us with ideas of things to do under Store No. 8.”

Thus far Store No. 8 has launched Code Eight, headed up by Rent the Runway founder and former CEO Jennifer Fleiss, and Project Kepler, headed up by Jet.com co-founder and former CTO Mike Hanrahan. This month it announced the hiring of Bart Stein, former CEO and co-founder of Wim Yogurt, to head up a new venture called Project Franklin, without providing any details.

“We bought a company that was pulled into Store No. 8, and started another the end of last year,” Flees said. “We’ll start another this year. That makes four, and there will be five by the time our next financial year starts. We have a couple of ideas that we’re not ready to start yet. I don’t envision many more companies.”

Flees said Store No. 8 isn’t tasked with driving all innovation within Walmart, but takes on projects with longer time horizons that are seen as disruptive technologies.

“There’s so much innovation happening in (Walmart’s) supply chain, in store operations and in ecommerce,” she said. “Their focus is over the next one to two years but we’re looking beyond that to three to five years out. If you don’t fund that kind of innovation early you’re left behind. We’re trying to incubate new businesses that also help us fund that innovation.”

Flees said there is a trade-off between knowing when to develop technology in house, and when it makes more sense to partner.

“While we’re driving to go fast, building everything ourselves is no always the right strategy,” she said. “It’s a combination of knowing what you need to own in terms of (intellectual property) and where you need work with others to go faster. For example, we partnered with Google on their natural voice processing technology. We figured we’d get faster to market working with them than building our own, but we have enough capabilities in house to make it seamless for our customers.”

Asked about the integration of the companies that made up Walmart’s buying spree, following the initial acquisition of Jet.com, Flees said the aim is to maintain what makes them distinctive and helped build loyal followings, while providing resources to reach scale and profitability much faster.

“When you look at companies like Shoes.com, Bonobos and Moosejaw, what they’ve done is build amazing trust with their customers, but they weren’t able to get to scale to reach break-even and beyond,” she said. “We can provide them with a platform to get there. Building trust and selling a premium brand in the way they want takes time. We’re giving them the scale through shipping and inventory management, payment and administrative costs. They also have access to category specialists with strong, deep relationships with suppliers.”

Asked how Walmart plans to hang onto the wealth of entrepreneurial talent from its acquisitions, Flees said it’s about ensuring strategic alignment for years to come, as much as it is about locking them in through stock options.

“The leaders we’re bringing in are just as passionate about the combined strategy,” she said. “We’re using the platform of Walmart to deliver on their vision with a higher degree of success. Yes, make sure to lock them in for a sufficient amount of time, but also where they can see results and understand how to operate within the bigger platform. We’re early on but so far I feel good about the trajectory.”

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