Good afternoon, everybody. I am Michael Lasser. I'm the Hardline Broadline and Food Retail Analyst at UBS. We could not be more excited to have the team from Walmart with us today. Obviously, Walmart is at the center of a lot of the themes that are being talked about throughout this incredible event over the last couple of days. And there's really probably not a better person that we could have at this event to talk about some of the key themes, which is who is Seth Dallaire.
Seth has a really incredible resume, having spent time at Amazon, leading their worldwide advertising effort, and then was a very senior executive at Instacart, and now is the Executive Vice President and Chief Growth Officer at Walmart, where his remit really (those are broad shoulders) because his remit is to help transform this business to a state-of-the-art organization that's drawing not only a traditional P&L, but a second P&L of things like retail media, data monetization, membership, all of which falls under Seth's purview, so we are super excited to have him, and not only that, but Seth has experience in the technology space and the retail space. There's no better way to illustrate that than getting to see Seth now talk about a retail experience and seeing him talk about when people go into the store and recognize the workers at a Walmart Supercenter.
He probably didn't realize that five years ago before he came to Walmart.
That's definitely true.
I'd be remiss if I failed to mention we also have Steph Wissink and Kary Brunner, who are key members of Walmart's investor relations team. Where I want to start our conversation, there's so much for us to talk about, so thank you so much for being here, is on your observations of Walmart as it relates to technology. It's really gone under this technology revolution over the last five years. In the past, value and convenience were really the key principles and distinct advantages for Walmart, whereas now it's a technology leader. So if you can talk about your observations of what you see as some of the key distinctions of Walmart when it comes to technology, that would be a great place for us to start.
Sure. And thank you for having me today. It's great to be here. I guess maybe I'd start by, you mentioned the people aspect and the sort of history of our Everyday Low Price and the offer that we bring to customers. That is an important differentiator for us in this new world where technology, e-com, agentic experiences for shopping are starting to develop. We think that all of the emphasis that we've placed historically on bringing Everyday Low Prices to our customers, creating convenient ways for them to shop, could be delivery or giving them time back, those things give us a real natural path into technology investments that we're making on both sides of the business, internally with supply chain and our internal operations, but then also how we're bringing Walmart to customers should they decide to shop in their phone or in a browser.
So there's a lot of similarity there. I know there's kind of the history of Walmart being a big box physical retailer, and then this idea that, well, now you're in the tech space. I think that having been at Walmart now for four years, I would say I was surprised by the amount of technology investment historically that's taken place at the company. Not that there weren't things that we couldn't invest in or new places to make investments in tech, but it's really done in service of bringing a better offer to the customer. Then it shows up in different ways that augment the physical attributes of the business that had made us so successful for so many years. If we decide to meet the customer's expectation that they can shop with us in the physical store or digitally, that's really important.
Both of those environments are important experiences for the customer, both of which can be better enabled by technology.
One of the things that you've said to me in the past is coming from the technology space, where one of the most difficult elements of building a tech company is to scale and acquire customers. Walmart has more than 100 million customer visits per week, which is a distinct advantage as it becomes a tech-enabled company. Is that fair?
Yeah .
It's a good segue into this idea of commerce really changing and agentic commerce. How do you see this evolving? Your perspective is probably very interesting because you came from a background of technology where maybe you didn't appreciate how important the physical interaction is within commerce. And over the last four years, you've probably really embraced and understood how important that experience is for the customer.
Yeah. A lot to say there. I would say that one thing that hasn't changed in all of this technology-driven disruption for customer experiences is the customer's expectation and belief that they'll have a better experience. So the alternatives that are available to them in retail are even more widely available today because of technology. If you don't like what you see in front of you physically, you can pull your phone out and find the next retailer there. It used to be you'd have to drive to the next location. Now it happens immediately, as soon as you take the device out of your pocket. But the core expectation of the experience, whether the customer is standing in front of the physical aisle or in front of their phone and building a basket, are that, "Do you have the product that I want?
Do you have it at the price that I want it? And can you get it to me? Can you deliver it to me in some way that I expect to see it or that's going to delight me? And we do that really well in physical stores. We had a lot to build on there to bring that experience into the technology space. And so even today, we're making a ton of progress on e-com. We've been public about that in terms of our earnings reports and the momentum that we have through the e-com business. The way that customers are shopping with us in e-com is changing. So the definition of e-com is that your branded domain, is it the Walmart business of e-com? Yes. Is it a third party? Are they using a different door to come to your site or to shop with you?
Yes, there's that as well. And who knows what might happen in the future that technology may enable. The consistent thread through each one of those experiences is back to that core retailing principle of, "Do you have the items that I want? Are they priced the right way? And can you deliver them to me? Or can I bring them to myself in a way that I expect?" And we do a really good job of that. So the technology pieces will continue to be areas of investment for us. And like we were talking about earlier, bringing the retailer mindset to some of these technology experiences is really important in an area where Walmart and our team is able to, I think, assist and educate with some of our technology partners.
There's a lot of complexity, and that's a massive understatement, in terms of bringing you or fulfilling a 20-item basket of goods, like your traditional grocery stock-up trip, when you're ordering it digitally. And part of the experience is the actual CX, like can I find the items again? If it's the same item that's available at multiple retailers, how is it priced? Are you competitive there? And then once that experience, you buy it, that's not the end of the relationship that the retailer has with the customer. In fact, it's one step. It's the first step. The second might be if you included in that basket general merchandise, for instance, in addition to groceries. If this is the shirt that doesn't fit or it's not the right color, how do I return it? Yeah. Do I bring it to the store to return it?
Those types of experiences are really important operationally for us. If there were a store operator that were sitting here with me today, they would tell you, "People shop online, and then they bring something into the store to return it." It's important that we serve them. So these new experiences that are happening digitally, that's an area where we're able to lean in and really help educate.
And this is an important point. Let me see if I can state it differently. The conventional wisdom is that the rise of agentic commerce is a continuum where it's going to be somewhere between or maybe even further than voice shopping, which has not materialized like anyone thought, versus e-commerce, which has been revolutionary. And agentic commerce could be even greater than that. But it's not really a continuum because, to your point, the idea that someone comes in and goes and buys a TV is very different than the purchase process of filling up your basket with 50 items on a Saturday afternoon. And so there may be different technological applications for different purchase occasions. And whatever it is, the values that Target offers, which is low prices, fast delivery, should really be an advantage no matter how this unfolds. Is that fair?
Yeah, and again, it gets back to what the customer expectations are. So, what we're—and one of the reasons why we're leaning into the space so heavily is that we know that these things are changing and that these are disruptive experiences for customers and that those behaviors may change. If we don't understand how they're changing or have some ability to observe them as they're happening now, then we feel like that would be a miss. Understanding the difference between a single-item basket search, for instance, when you're coming in and spearfishing for something, that's a very different type of shopping occasion for a customer than building a 20-item basket of goods that's your grocery, your weekly stock-up trip. The way that you build that basket is very different. We do a great job on the building experience for groceries and consumables.
I mean, those baskets are complex, multi-item baskets, very difficult to not only just to provide the right customer experience to build the basket, but then how do we provide that basket as an order for one of our associates to then go and pick in the store and then for a driver to take to the customer in the event that they want it delivered? Those can be technology-driven, but if the query string becomes like a longer natural language query string for "Hey, I'm hosting a dinner party for 10 people this Saturday.
And we're all invited, by the way.
Yeah. Can you recommend a, "Here's a budget. Here's a type of theme or something like that?" That's a very different and new type of query string than what historically, I'll say, all the places that I've worked that I've seen. And so if it's starting to happen, you want to lean in and understand, "Okay, why is it happening?" And then are the responses providing utility there? The customer's expectation, they may come in and do that search once or twice. If they're not getting an answer that they want, they'll go somewhere else. This is the same way that if they don't find the product they want in front of them at the shelf, they used to drive to another store.
Yeah. It's a great jumping-off point into this question of how Walmart is evolving and partnering with outsiders to be positioned for whatever might occur as commerce evolves, including partnering with OpenAI to be included in some of the ChatGPT functionality. What was the rationale behind that decision? And how does Walmart look at some of the pros and cons of partnering with large language models in the future?
We want to be where our customers are. When you look at the trends of customer behavior in terms of usage of these agents, it's undeniable that there's a lot of people using them. I was rewinding the tape for the past times that I've been to this conference. Last year, Dimitri from Perplexity was up on stage. I think two years ago, Sarah.
Sarah Friar .
Friar was as well. But in year three behind, was there anyone up on? Was there anyone here talking about it? I don't know.
If we had a dollar for every time the words AI were mentioned together, we wouldn't be here necessarily.
Yeah. But I think that's an important perspective to share because if the customer is finding real value here and they start to just use these types of tools at scale, then you have a decision to make about whether you want to lean in and engage or whether you want to step back. And I think we see a lot of advantages to leaning in, one, because we get to learn. We'll get to see the impact or the way that consumers are behaving in these agents and then how Walmart shows up. In some cases, these products, center aisle consumables products, for instance, may be available at many different retailers. So how is it that you show up when that result is served if a customer is making a query to an agent for that product that's available at many places?
We think we're advantaged there, well, with our price positioning and then the availability in our distribution network with our stores being great fulfillment nodes for fast delivery. That's a good spot to be in. The alternatives there, where we'd opt not to participate, might look very different, and you might not be able to see. You'd have to interpret or guess, and really, we want to be there at the beginning to understand this.
It seems like two of the advantages are, one, the data that you get. You alluded to this just a minute ago where the way a consumer interacts with a large language model is different than how they have interacted with a search engine historically where you might put in shampoo in the search engine versus now you'll put a more sophisticated question. Having that data is very important. Also, the consumer might not have even considered Walmart as a place to go and buy shampoo. Now, that consumer can at least be, Walmart can be part of the consideration set. Is that fair?
That's right. So understanding the nature of the query string is really important because many of the queries in these agents are research-driven queries. So high consideration goods like a television, for instance, can you help me find a 50-inch television with this type of resolution for less than $500 that can be delivered tomorrow? Now, that's a very different type of query than 50-inch Vizio TV. And so the answer that you get, the retrieval, may look at customer reviews. It may look at the pricing. It may look at the inventory position and where it's available if delivery is important. And so we have to be attentive to that because, again, you might see that when you're shopping with us directly. We'll have all of that information available to you.
If you're not there participating with the agent, you may never come into the consideration set for that customer for that type of query, so that's a really important idea about why we're working so closely with these companies.
Very helpful. One of the biggest points of debate right now, or certainly one of the most significant questions that are being asked, is how does the development of agentic commerce and the potential for consumers to shop through large language models impact a key profit pool that retailers like Walmart have been able to harvest, which is advertising and retail media? How do you see that playing out?
In many different ways. I don't think there will be a single solution or a single response to what these agents decide to provide from a monetization standpoint. And so for us, we see a couple of advantages. Back to your point about incrementality, if we're able to speak to a customer that has never shopped with Walmart before in e-comm and they haven't thought about working with us because, "Well, I didn't know that Walmart carried that product." Who knew?
Who knew?
Who knew? Then we earn the opportunity to serve that customer. And as a new customer, we see that potentially there may be some incrementality there. Now, when that purchase happens, back to the initial point that I made about it being one step in a relationship with a customer, we may follow up with you with emails, a CRM. It's the beginning of a relationship that we have. So from a retail media position in terms of the response or impact, there could be very positive impacts there because there would be something incremental to serving new customers.
There may be other user experiences that these agents provide that allow for, let's just put the entirety of the app or embed the app in the experience, and then you're bringing to bear all of the things, all the merchandising capability that you have within your owned and operated apps into that experience. That might be one potential opportunity. There may be others that are more single-item focused and deal with native checkout, which have different opportunities, and us understanding what those things look like today is important because we can talk with these technology leaders about what retail is or why these experiences that we've built are important for them to incorporate into their offering.
The ability here for us to work with them or educate them about those experiences is really helpful because what you're seeing today will not be the same experience and capability that you're going to see a year from now, two years from now, three years from now. They may look very different.
Yeah. It seems like one of the answers here is we don't know. But whatever it is, Walmart has shown that the principles of low price, fast delivery, and a tech-enabled experience resonate independent of what happens as retail evolves. Those are core grounding principles that are going to be important no matter what. And two, Walmart has shown an ability to adapt to the changing landscape, whether it's in the past the consumer went into a store, picked the items off the shelf, it's him or herself. Now they may be paying Walmart to be able to do that. And Walmart's been able to evolve. So no matter what happens, those paths and those principles and that experience should be very powerful in how outsiders should think about how this might evolve in the future. Is that right?
Yeah. 100%. And on a couple of different vectors there. So the first one being the customer-facing experience. Yes, we want to bring all of the strengths and competitive advantage that we have with pricing and delivery speed to any form, any form factor. We want to be there if our customers are there. We want to be able to speak with them. But then a lot of these tools also and capabilities exist in ways that the consumer doesn't see directly. So we are working closely with a lot of these companies to develop AI capabilities that benefit our suppliers and our associates in stores. And how that shows up for the customer experience, I'll give you an example. We may be able to provide a supplier with an inventory position, for instance, through a data product like Luminate.
And we will give them updated or high-frequency updates on inventory positions by SKU level at a store-level grain if they want it. And then they can use that information to measure their share in the category or their position in a particular store at any given point. And by the way, that's how we goal a lot of our suppliers. An important metric with them is their inventory position, their in-stock position. So you bring this forward in an agentic world or even whether you're working in a Sparky app internally or working in a third party. If you add this item to your basket, your expectation is that it's going to be delivered to you.
That goes through to an associate who says, "Okay, I'm going to pick this order for Michael, and I'm going to go to the shelf and see if it's available," and if it's not available, it's a registered event as a nil-pick. One of the biggest complaints that we hear from members and from customers about online delivery and e-commerce experiences is that when you order 20 items and get 15 or you get a ton of substitutes, that's not the experience that you want. How do you reduce those errors in that experience? Technology can bring to bear much more accuracy there because I could say to the supplier, I won't name a supplier, but let's say that it's Seth's.
Cookies.
Seth's Cookies were nil-picked 10x at the Walmart Store 100, and I can associate a monetary value with that for missed sales. I, as the supplier, can also go in and say, "Well, are we flowing inventory into the right stores? Because we've got more than enough here at these other stores. We don't have any in this store here," and so you may change the pattern of inventory that you flow in. Now, that operationally for us makes a ton of sense because we drive efficiency out of that. It makes the associate experience better because you can imagine walking back and forth to all these different aisles and picking orders for our customers. If you're not finding what you want, you know you're disappointing the customer potentially, and you're wasting your own time.
This is labor we're paying for to go back and forth to conduct these picking errands, so that shows up in better orders when we bring that type of intelligence and that capability to the back-end non-customer-facing capabilities that shows up in what we bring to you as a delivery to your doorstep or put in the back of your trunk when you show up for pickup.
And maybe to put a bow on it, if I, as Michael Lasser, were to go to an LLM and say, "I want to buy Seth's Cookies," and the first thing it did was interacted with Walmart and said, "Do you have Seth's Cookies?" And then it found when that transaction was ultimately made, if it were to be made through an agent, that ultimately there was an out-of-stock at the local Walmart. There is an opportunity to improve the profitability of Walmart in the back-end by providing that insight into Seth's Cookies, by making the associate in the store more efficient with how they're picking that cookie. So having this mindset that the world is going to change and there's not an ability to harvest profitability seems a bit off reality.
Yeah. And what I want to be clear about is that there's two different ways that the agents or AI can influence our business at the macro level. One would be internally for our operation, then externally how we interact with customers. And on both fronts, we're leaning in to understand how can we experiment with these capabilities? Where can they drive efficiency through our business or provide a better customer experience? Or do something that can enable us to stay true to our core mission, which is providing people with Everyday Low Prices, helping them save money and live better.
Yeah. Core to Walmart's mission. I would be hard-pressed to not ask the head of the advertising business about the advertising business. So with that being said, where does Walmart stand in terms of its potential from harvesting more retail media dollars today? Where do you see that next leg of growth coming from?
So the business is growing well. And it's still relatively particular. We've got a lot of room to grow. We haven't been in the retail media business in earnest for 15 years. We've been making investments really in the last couple of years to make a better experience for suppliers and then measure the experience of how many ads can we put into the e-commerce experience before we see impact on customer experience. We're doing everything on the advertising side to make the experience better for the customer. Let's help them build baskets. Let's help them become aware or consider brands and products that maybe they hadn't considered before. And that's where the retail media piece of the business is really helpful. So we were very bullish on how we're moving forward with that business. We'll continue to invest there.
And then there are new surfaces where we're bringing retail media and advertising to bear primarily with television, with the Vizio acquisition. And that's something that we actually last night we celebrated. That was when we marked the one-year anniversary of the.
Happy anniversary.
Approval. Thank you. But then also in the past couple of days, I mean, this is a huge selling season for us. And we've got some amazing deals on these TVs. So understanding are we merchandising these products the right way? Because when they're sold and they're then put into customers' homes, they're technology-enabled as well. And so all of the retail media signals that are brought to bear on improving the customer experience for e-comm, many of them can be applied in that TV viewing experience.
And so from a supplier standpoint or a brand advertiser, you will say, "Okay, I can serve you, Michael, a different ad because I know that you're a buyer or you're in this particular category or you live in this area." And then Seth gets because he lives in a different part of the country and he has a different type of purchase behavior. That's an incredibly powerful tool to bring to complement what we've been doing so far in the e-comm space. So we're really excited about the progress we're making there. We've got a lot of room to run there still. So we're still working on integrating and innovating in the space. But it's nice to have that piece of the business to talk about with our advertiser partners because these TVs, we can make them EDLP.
And when there are great prices, like what we saw over this past weekend, those TVs fly off the shelves. And when they do, if the tech that sits inside them is great and innovative as well, then we have a win all the way around. And that's incremental to and complementary to what we've been doing so far with e-comm. So we're really excited about that too.
We talked about agentic commerce. We talked about advertising. You brought up Sentilla. You are responsible, again, for a lot of these alternative revenue streams. What are you most excited about over the next three to five years, especially as Walmart gains more scale in these areas and becomes even more important to both its customers and its vendor partners and advertising partners? How do you see this unfolding?
Yeah. Well, I wouldn't say that I'm more excited about any one of them. I love all of the teams and the businesses. But I would say that as we improve the experiences and the omnichannel capability that we offer customers, we stay true to everyday low prices and convenience and things like speed of delivery. These are really exciting new capabilities that even last year we were just starting with that now we're seeing real opportunity and interest from customers and members around how to use them. When simple things like that become available to us to offer to customers, we can then naturally, as we have a deeper relationship with them, see how they impact purchase behavior.
What we're seeing is that if someone comes in for the first time to make a basket with us and have it delivered, if it's an emergency, for instance, and they do it in a fast delivery, we can then see that if that experience is great, so very few substitutes, great pricing, fast delivery, they're going to come back again. When they come back again, that second or third time, well, then they tip into membership. When they tip into membership, their purchase behavior with us changes pretty dramatically, and our opportunity to serve them changes dramatically as well. They're no longer just shopping with us in the physical store. They're shopping with us in the physical store if they choose to do it, or they're shopping with us in the app or doing something digitally that helps us deepen the relationship and ultimately grow more baskets.
And membership income. And so, I would say that it's really each one of the teams that I'm working with contributes to that sort of crank of that flywheel. And we're really dependent on and working, drafting behind a lot of the e-commerce growth and all the investments that we've made there. So although we get a lot of credit for growing profits or being a higher margin profit business in the teams that I work with, I will say that we do so at the service of these other teams and the experience that our customers love so much. So it's no one thing. It's many.
Speaking of great experiences, this was awesome. Please join me in thanking Seth for all his time and insight.
Thank you.