Walmart Shuts Down Innovation Lab as Retailers See Tech Bets Eat Into Margins

With the race for retailers’ digital presences growing more competitive each year, demanding more resources, Walmart is reportedly axing its Store No. 8 innovation hub to cut costs.

The retail giant is shuttering its technology and business innovation incubator, The Wall Street Journal reported Friday (Jan, 19), citing an internal memo. The unit, which has been around since 2017, was behind such retail innovations as shopping via text capabilities, voice commerce features and the chain’s InHome direct-to-fridge delivery service.

“We’ve graduated capabilities from this operating approach that are now fully embedded in our organization,” Walmart Chief Financial Officer John Rainey reportedly said in the memo. “The responsibility to shape the future of retail is now shared by all segments.”

In other ways, Walmart appears to be stepping up its in-store technology efforts. For instance, the retailer revealed Jan. 12 a renovated Quakertown Supercenter in Bucks County, dubbed the “store of the future,” which incorporates interactive technology that integrates online and in-person shopping.

Yet remaining competitive is becoming increasingly expensive, as eCommerce giant Amazon expands its retail technology efforts. For instance, the company has been expanding its “Just Walk Out” frictionless checkout technology across industries, expanding well beyond grocery and convenience retailers to, most recently, hospital cafeterias and clothing stores. The eCommerce company also has a leg up in terms of the breadth of its portfolio, able to integrate shopping experiences into, for instance, Prime Video content.

For years, retailers have been struggling with the cost of keeping up with Amazon, in terms of everything from free shipping to the metaverse to running in-store digital restaurants, forced to pull back on their tech bets.

Yet retailers largely agree that consumers want connected experiences in stores. Take, for instance, the findings of the PYMNTS Intelligence report “Big Retail’s Innovation Mandate: Convenience and Personalization,” which drew from a survey of 300 major U.S. and U.K. retailers.

The study revealed that 83% of general retailers think consumers would be very or extremely likely to switch merchants if they were not provided with mobile apps, and the same with in-store barcode and QR code scanning apps. Plus, 79% think they would do so if not given alternative payment methods in-store.

Brick-and-mortar retailers are finding it difficult to compete with eCommerce channels.

“2024 will be the year that brick-and-mortar retailers will be forced to think beyond incremental improvements in in-store checkout and begin using their physical footprint to support the shopping journey that consumers want,” PYMNTS’ Karen Webster observed in a Jan. 8 feature. “And not because busy consumers use digital channels more often, but because consumers have embraced new digital buying options that keep them away from the store entirely.”

PYMNTS Intelligence data found that more than 30% of retail subscribers and 20% of all consumers said that most or all their personal products are bought using auto-fill methods. That share jumped to 28% for Generation Z and 33% for millennials.

As Walmart closes its innovation hub, it remains to be seen how the company will continue to adapt and invest in its digital presence, as remaining competitive becomes increasingly costly.

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