Walmart Makes Moves for Efficiency with Robots to Spur Sales

Key Points

• The retailer is increasing its capabilities in the areas of AI, robotics and machine learning.
• These moves will boost efficiency at stores and distribution centers, as well as help the company better compete with Amazon on the home-delivery level.
• Many of these innovations are developed at Walmart's incubator unit. Store Nº8.

Walmart Inc. NYSE: WMT may not be the first thing that pops into your mind when you think of AI, robotics, and machine learning, but it’s all coming to a Wally World near you. 

Efficiency has long been the watchword of the most successful companies, and AI is bringing yet one more element to the fore. At an investors’ meeting, the company said it will be investing in supply-chain automation technologies that it expects will spur sales and earnings growth. 

WalMart’s U.S. president and CEO John Furner outlined the company’s efforts to automate, and explained the decision to invest even further. 

In addition to the goal of better serving customers faster and more accurately, “Automation helps our associates. It results in less manual labor. Over time, we believe we'll have the same or more associates and a larger business overall. There will be new roles emerging that are less manual, better designed to serve customers, and which pay more.”

He said the company aims to increase productivity and cement its advantage as a low-cost provider, which results in a return for shareholders. 

Taking Aim At Amazon

While Furner didn’t specifically mention Amazon.com Inc. NASDAQ: AMZN by name, he was clearly referring to its home delivery capabilities when he said, “We’re picking and fulfilling orders from our stores, batching deliveries to create more density, and delivering to doorsteps, garages, and all the way into the customers’ homes. We have a strong store pickup business, and we need to become more competitive with to-home delivery, especially for general merchandise.”

Automation helps the company combine orders and creates more density, a shipping term that refers to the amount of space a package occupies relative to its weight. 

The company has been adding robotics and machine learning to its processes for the past six years and has already implemented the technologies at warehouses, cutting down the time jobs take, as well as the physical labor involved. 

Investors like any news that has a whiff of doing more with less, and Wall Street rewarded Walmart with a share price gain of $1.13 on April 6, up 0.75%, to $150.80. 

In addition to increasing automation technologies in warehouse and distribution settings, the company is also working to perfect what’s called “conversational shopping” with customer communications. 

Fewer Annoying Bots

You know those irritating bots that you sometimes get when trying to communicate with a company? The ones with a cute human name, but you know there’s not really a person there?

Walmart knows those can be annoying and it’s using language technologies including ChatGPT and BERT from Alphabet Inc. NASDAQ: GOOGL to develop more natural ways of communicating with customers on their devices. 

If you’re only familiar with the stores, or perhaps home delivery, you may not know that Walmart has a tech incubation arm, Store Nº8. That’s where the company is proceeding with developments such as home delivery automation, drone delivery and conversational texts. The incubator also works on sustainability, food and next-gen agriculture, and health and wellness projects. 

The AI innovations at Walmart aren’t exactly new, having been in development for the past several years. However, they, along with other applications using robotics and machine learning, are garnering more attention from investors and analysts who are looking ahead to the next growth phase for a large, well-established mega-cap.

On the heels of the news from the investors’ event, three analysts boosted their price targets for the stock, MarketBeat data show. Analysts have a “moderate buy” rating on the stock, with a target of $164.13, an upside of 8.84%. 

Reliable Dividend Payer

You wouldn’t necessarily expect Walmart to be in the category of a fast grower, and that’s not the reason you would invest in this stock. Instead, you expect a company that knows how to generate steady sales and earnings, and one that’s a reliable dividend payer. 

Walmart’s dividend yield is 1.51% and the company has a 51-year track record of increasing shareholder payouts. 

The moves into AI and other automation technologies will help the company continue its expansion into new ways of shopping, namely via mobile devices, as well as help the company move goods more quickly from point A to point B. 

While some analysts believe domestic store expansion isn’t the likely path for the company’s growth, enhancing its capabilities to compete with Amazon, as well as boosting operational efficiencies, seems like a viable way to shore up growth as consumer shopping habits evolve.