Walmart, Robotics, and The New Goliaths
How Walmart, and others, are using Robots to extend their moats
The New Goliaths Leverage Software to Market Leadership
Software built internally, for company use, creates a differentiated moat. This is, at least, part of the argument of “The New Goliaths”, by James Bessen. Companies building their own software are able to serve a more diverse set of markets and clients, without significantly increasing operational overhead. For example, Walmart can customize in-store inventory to the right geographic market. In the past, local stores might have better served their customers by stocking relevant inventory.
Companies that tried to have the same inventory across the country would have struggled. With significant investment in software, it’s possible for the Walmarts of the world to overcome this. When speaking of the barcode scanner, Bessen had this to say,
"Walmart took that same basic bar code scanner technology and used it to build a massive logistics and inventory management system connecting stores, suppliers, and warehouses with the enormous flow of data from its scanners. This system, deployed with a new business model and organizational structure, allowed Walmart to offer greater selection in stores, to respond more rapidly to changing demand, and to do this with less inventory and lower transportation costs. Using this advantage, Walmart grew to dominate the retail sector.”1
Most of the improvements in scale and complexity, without growing overhead, have been in software. However, robotics is expanding the moat/advantage of the New Goliaths to hardware. Walmart’s recent earnings and investor conversations provide clear examples.
Robotics is becoming another pillar of market leadership
Bessen’s example of Walmart mentioned the use of barcode scanner. Walmart is taking that to the next level by getting rid of the checkout, entirely. Walmart’s CEO, Doug McMillon, mentioned a recently opened, Sam’s Club, in Grapevine Texas.
”Boldly, our Sam's team also eliminated traditional checkouts. So our members can use Scan & Go and the new computer vision exit technology to exit the club faster. Just imagine a 150,000 square foot Sam's Club with no traditional checkouts.”2
This checkout-less store shows how core innovation in an area, checkout, can continue decades later, still yielding savings. Walmart is leveraging tech beyond checkout. Walmart is investing in robotics across a number of areas of its supply chain.
[W]e continue to make progress in the automation of our supply chain, is now more than 50% of our fulfillment center volume is automated, which is twice as much at this point last year. This has the obvious benefit of lowering the per unit cost of delivery. These factors contributed to the third consecutive quarter of approximately 40% reduction in U.S. net delivery cost per order. Importantly, while we drive greater efficiency, we're enhancing service levels with customer NPS for delivery reaching all-time highs this quarter.3
Walmart’s CEO made clear to investors that the ROI on these investments is clear, unlike potentially speculative AI investments.
”[W]e can see the IRR of the big ambient centers with Symbiotic, the big perishable centers with suppliers like Vitron, the big eCommerce fulfillment center with Knapp. And those [investments] are all happening at the same time… And so far, they're behaving equal to or better than we've modeled as it relates to the metrics.”4
And, Walmart isn’t stopping at distribution centers, they are actively exploring last mile delivery with drone services.
“And I can order on drone. I was telling a group earlier. A few weeks ago, Shelley was making Chicken Marsala, and she said out loud, I forgot the cooking wine, which meant I was supposed to get up off the couch and stop watching football and go get Marsala Cooking wine. I'm married and understand how these things work now? But what we had was a drone delivery in less than 15 minutes that dropped it right at my front door, and that was pretty cool.”
Walmart is not alone in its experimentation, or development of robotics. Well known examples are Amazon and Kiva, or Tesla and Optimus. Other, example companies include FedEx, DHL, BMW, Toyota, the Schaeffler Group, and many more.
Robotics projects are expensive and risky. Large corporations turn to partnerships and corporate venture capital, to help finance these projects.
Corporate Sales and Corporate Venture Capital Finance These Deals
Corporations often pair these larger robotics projects with an investment in the robotics corporation. This de-risks the project for the corporation (they worry less about the startup going out of business) and provides additional upside (stock appreciation), too.
Walmart owns 11% of Symbotic as part of the deal between the two5
Schaeffler Group is a customer and investor in Agility Robotics, maker of the Digit Humanoid robot 6
FedEx got warrants that vested, based on order volume, as part of its deal with BerkshireGrey 7
Of course, if projects go well, the company can always buy the startup and bring everything in house, see Amazon and Kiva. But these strategic investments provide a way to share risk in these projects.
Robotic Goliaths
Manufacturing has decades of experience in robotics, helping those companies scale. Robots are getting used in new areas, particularly around commerce and logistics, that can unlock even larger opportunities for companies that take advantage. Once a larger company establishes itself with robotics, it’ll take years for laggards companies to catch up (if ever). Amazon, Walmart, Tesla, and others are building a promising future.
“The New Goliaths”, James Bessen, page 8
Doug McMillon, CEO, FY Q3 2025 earnings call,
John Rainey, CFO, FY Q3 2025 earnings call
Doug McMillon, CEO, Morgan Stanley Global Consumer & Retail Conference, December 3rd, 2024
https://www.cnbc.com/2023/10/07/a-big-ai-and-robotics-idea-that-has-attracted-walmart-and-softbank.html
https://agilityrobotics.com/content/agility-robotics-announces-strategic-investment-and-agreement-with-motiontechnology-company-schaeffler-group
https://newsroom.fedex.com/newsroom/global-english/berkshire-grey-and-fedex-expand-their-robotic-automation-solutions-relationship#:~:text=Additionally%2C%20Berkshire%20Grey%20has%20granted,vesting%20of%20all%2025%20million