Walmart’s AI Revolution: Transforming eCommerce and Driving Efficiency Gains

In the rapidly evolving world of retail, Walmart is leading the charge by integrating AI into its eCommerce operations, driving substantial efficiency gains and enhancing customer experiences. This has been to great effect as their Q2 FY25 Earnings report shared a 21% surge in Q2 FY25.

‍

Ecommerce AI to 100x Productivity

A key component of this transformation is Walmart’s use of generative AI to enhance its product catalog—a cornerstone of its eCommerce ecosystem. The product catalog is crucial as it impacts everything from helping customers find the right products to managing inventory and fulfilling orders. By leveraging multiple large language models (LLMs), Walmart has been able to accurately create or improve over 850 million pieces of data in its catalog. This scale of data management would have been nearly impossible without AI.

‍"Without the use of generative AI, this work would have required nearly 100 times the current headcount to complete in the same amount of time" said Walmart CEO Doug McMillon.

This stark comparison underscores the efficiency gains AI brings to the table, allowing Walmart to process and enhance vast amounts of data swiftly and accurately, far beyond the capabilities of a human workforce. Walmart’s use of AI is a critical driver of its operational efficiency, but it's not the only factor contributing to the company's recent gains. Walmart’s Q2 FY25 results highlight several other efficiency improvements:

• Revenue and Operating Income Growth: Walmart reported a 4.8% increase in revenue, while operating income grew at an even faster pace of 8.5%. This growth was fueled by higher gross margins, increased membership income, and reduced losses in their eCommerce operations. The integration of AI into operations has played a key role in improving gross margins by optimizing processes and reducing operational costs.
• Inventory Management: Through improved data management and AI-driven insights, Walmart managed to reduce its global inventory by 2%, while still maintaining healthy in-stock levels. In the U.S., inventory was reduced by 2.6%, a clear indication of how AI is helping Walmart streamline its supply chain and reduce excess stock, which in turn minimizes costs associated with overstocking and storage.
• Advertising Revenue Growth: Another area where Walmart is seeing efficiency gains is in its advertising business, which grew by 26% globally. Specifically, Walmart Connect, the U.S. arm of its advertising division, saw a 30% growth. This growth can be attributed to AI-enhanced targeting capabilities, which allow advertisers to reach customers more effectively, driving higher returns on advertising spend and contributing to overall profitability.
• Free Cash Flow Management: Walmart also reported a significant free cash flow of $5.9 billion in the first half of FY25. Although this represented a decrease from the previous year due to increased capital expenditures, the ability to generate substantial free cash flow despite higher investments highlights Walmart’s operational efficiency. AI’s role in optimizing spending and resource allocation across various parts of the business contributes to this strong cash flow management.

‍

Enhancing the Customer Experience with AI

Walmart’s application of AI in eCommerce goes beyond operational efficiency—it’s also about creating a better shopping experience for customers. One of the ways Walmart is achieving this is through AI-powered search functionalities on its app and website. These tools help customers find exactly what they’re looking for quickly and easily, enhancing satisfaction and driving sales.

The company is also rolling out an AI-driven shopping assistant designed to provide personalized advice and ideas to shoppers. This assistant can answer complex queries such as "Which TV is best for watching sports?" and will soon be capable of even more detailed follow-ups, like "How's the lighting in the room where you'll place the TV?" This level of interaction not only improves the customer experience but also builds trust and engagement, encouraging repeat business.

You can use Ecomtent's product listing AI to help increase discoverability in this new LLM powered conversational search.

‍

Streamlining Operations and Supporting Sellers

AI is also making significant inroads in how Walmart supports its sellers, particularly on its marketplace platform. Recognizing that sellers should focus on selling rather than getting bogged down by administrative tasks, Walmart is testing a new generative AI experience for select U.S.-based sellers. This new system allows sellers to ask any question and receive quick, succinct answers without wading through long articles or complex documents.

This initiative is aimed at making the selling process as seamless as possible, ultimately helping sellers grow their businesses more efficiently. By reducing the time and effort sellers spend on administrative tasks, Walmart is enabling them to focus more on their core business, driving sales, and improving overall marketplace performance.

‍

The Future of AI at Walmart

Walmart’s use of AI, particularly generative AI, is poised to touch nearly every part of its business. From enhancing the customer and associate experience to improving inventory management and supporting sellers, AI is becoming integral to how Walmart operates. The company’s commitment to continuing to experiment and deploy AI technologies globally signals that this is just the beginning.

As Walmart continues to refine and expand its AI capabilities, the efficiency gains and improvements in customer experience will likely continue to grow, setting a new benchmark for the retail industry. By embedding AI deeply into its eCommerce operations and broader business processes, Walmart is not only improving its bottom line but also paving the way for the future of retail.

‍

You too can explore the efficiencies AI will bring with the leading AI tool for ecommerce.

At Ecomtent, we are focusing on helping sellers optimize for this future of AI powered search, generating relevant visual and written product listing content for this new SEO.

Make sure to follow our podcast for weekly episodes exploring the latest of AI in Ecommerce.