Monday, October 21, 2013

Silicon Valley is Incredibly Attractive, the Monday Edition

Decades ago, I happened to see a piece of correspondence from Walmart to one of its suppliers. The letter was apparently in response to a letter from the supplier, and it concerned Electronic Data Interchange (EDI). This standard, fairly revolutionary at the time, allowed a supplier to communicate with a retailer via electronic means, so that purchase orders and the like could be sent by modem, from computer to computer, rather than by paper.

Walmart, with its dedication to managing stores and inventories as intelligently as possible, was a pioneer in EDI. For some of the suppliers, however, EDI merely represented a set of onerous new requirements and controls.

The one thing that I remember from the letter was that Walmart was assuring the supplier (presumably in response to a sarcastic comment in the supplier's original letter) that the supplier would NOT have to move to Bentonville, Arkansas.

Walmart understood, long before anyone else did, that location didn't matter. The increasing power of computers, and the ability to connect these computers via modem networks, meant that a buyer in Bentonville could communicate with a supplier anywhere in the world and complete a business transaction in seconds. The money would transfer from Walmart's computer to the supplier's computer (or to their respective banks), and the inventory status would be updated on both computers also - pending, of course, the actual arrival of the trucks at the desired locations.

It's a lesson that I've taken to heart, most recently in a post entitled Silicon Valley is Devoid of Reason, the Monday Edition. That particular post, like most of my posts, was written in advance of its publication.

But before my rant could be published, I ran across a story about a company that specifically desires a geographic presence in Silicon Valley.

The company? Walmart.

The country’s largest retailer, which for years didn’t blink at would-be competitors, is now under such a threat from Amazon that it is frantically playing catch-up by learning the technology business, including starting @WalmartLabs, its dot-com headquarters....

The company has had a small presence near Silicon Valley for more than a decade, but until recently, engineers in the area barely knew it existed. It signed a lease three years ago for the San Bruno office, north of the valley — and across the street from YouTube — and is opening another this fall in Sunnyvale, home of Yahoo, in the heart of the valley.

And in order to attract talent, Walmart California has to do things a little differently than Walmart Arkansas.

For example, at press events in Bentonville, Ark., Walmart’s headquarters, the menu tends to be ham sandwiches, chips and iced tea. At a recent event in San Bruno, it was white asparagus panna cotta with house-smoked salmon tartar, morel mushroom macaroons and charcuterie from a whole pig.

So perhaps geographic proximity matters a little more than I thought. After all, the Walton family has a few billion dollars more than the Bredehoft family, so perhaps they know what they're doing.

Incidentally, the story illustrates something else - nothing lasts forever. About a century ago, all of the small markets were wiped out by the A&P stores that sprung up across the land. A&P, in its turn, was wiped out by the Safeways and Krogers. Those stores, in turn, are being adversely affected by the Walmarts - and now the Safeways and Krogers are crying foul, ignoring the fact that they had destroyed competition back in their own heyday. Today, it's quite possible that all the people who want to see Walmart destroyed are going to get their wish - and when Amazon takes over, with ruthless business processes that make Walmart look like amateurs, those protestors will long for the days when the Bentonville company actually hired people at welfare wages, rather than not hiring anyone at all.

Meanwhile, the consumers should enjoy the moment. As Don McArthur commented about the forthcoming competition between Amazon and Walmart,

I see free virtual servers in my future.
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