By Sarah Nassauer | Photographs by Kevin Hagen for The Wall Street Journal
Epiphany Davis arrived at work in lower Manhattan on a recent
morning, consulted her cellphone and set off by foot in search of
products ordered via text message by wealthy New Yorkers.
From her company's loft-like headquarters, Ms. Davis walked to a
health food store to get SmartyPants Kids vitamins, but the variety
was out of stock. Checking her cellphone often for instructions,
she walked to a grocery store for a single bag of Guittard milk
chocolate chips. She rode the subway to a Nespresso store for three
boxes of coffee pods, then walked to Bloomingdale's to pick up a
$245 navy blue MZ Wallace backpack.
Ms. Davis works for Jetblack, a personal-shopping company
targeted at mothers launched last summer by a surprising newcomer
to the field -- Walmart Inc. A few hundred shoppers in New York
City pay $600 a year to order anything by text message except for
fresh food. Members were invited by Walmart, or referred by current
members, and need to have a doorman to join.
Their orders go to Jetblack headquarters where dozens of agents
sit at computers and field requests, from reordering diapers to
making suggestions on high-end cribs, organic snacks and yoga
attire. Couriers fetch the items and bring them back to a Manhattan
delivery hub, where they are wrapped in black packaging and hand
delivered, usually the same day.
It's a labor-intensive operation that loses money. But making
money isn't the goal, at least not right away.
Walmart executives are betting the upstart becomes a powerful
weapon in an escalating technological ground war with Amazon.com
Inc., as the two companies battle over shoppers who are
increasingly making all sorts of purchases online. Amazon reset the
landscape with Prime, in which more than 100 million people
globally get two-day delivery and other perks for $119 a year. Even
though Walmart is bigger in sales overall, it is an underdog
online, and it is fighting for a larger presence.
Walmart is using Jetblack's army of human agents to train an
artificial intelligence system that could someday power an
automated personal-shopping service, preparing Walmart for a time
when the search bar disappears and more shopping is done through
voice-activated devices, said Jetblack CEO Jenny Fleiss.
"It's the tech of the future, right? It's not what everyone is
doing today," said Ms. Fleiss, who previously co-founded apparel
rental company Rent The Runway. The CEO said it could be five to
seven years before the system is mostly automated and less reliant
on humans. "This is a long journey," she said. "And I think we were
aware of that going in."
Walmart is competing with Amazon, which has $233 billion in
annual sales, including web services. In addition to Prime, the
online giant has same-day grocery delivery from Whole Foods stores
in some cities, plans to open dozens of small physical grocery
stores and has sold millions of Echo speakers that let shoppers
skip stores and websites altogether, and shop for products or
request music with their voice.
Walmart is the world's biggest retailer by revenue, with $514
billion in annual sales, but e-commerce makes up only a small
percentage. That's out of sync with where retail is growing
fastest. Across the U.S., online shopping accounted for 9.7% of
total retail sales last year and grew 14.2% from the previous year,
according to the Commerce Department.
Walmart bought India's biggest e-commerce site. It has been
buying up small online retailers including men's apparel company
Bonobos and is testing autonomous cargo vans for home grocery
delivery in places such as Surprise, Ariz.
The rivalry is clear: At an annual meeting for Walmart store
managers last year, attendees watched a parody video that included
a clip of Darth Vader's ship superimposed with an Amazon-like logo
chasing Princess Leia's smaller vessel, according to people
familiar with the event.
Jetblack is a small piece of Walmart's online investments, but
it is one of the biggest gambles Walmart is making to attract
wealthy shoppers and burnish its tech credentials.
Walmart primarily views the company as a research hub on AI and
voice shopping. Some pieces of the business "could very readily be
applied to the broader ecosystem in time," she said. Jetblack's
software is learning to make agents more efficient, already
suggesting language to use for many text interactions, said Ms.
Fleiss.
Jetblack's goal is that over time, through these interactions,
the computer algorithm will learn to respond to requests with
humanlike nuance but machine efficiency.
For now, the majority of interactions with Jetblack members
require a human agent to press send on a text message or research a
product recommendation, according to current and former
customer-service agents.
On-demand delivery has been a treacherous business. In the late
1990s, Kozmo.com Inc., a startup promising delivery of nearly
anything in under an hour, raised more than $250 million in
financing, including $60 million from Amazon, but folded in 2001
after losing too much money. WunWun Inc. let New Yorkers order
anything for fast delivery through an app, sometimes free, but
found buying inventory by sending couriers to local stores without
real-time knowledge of what was in stock too inefficient to become
profitable, said founder Lee Hnetinka. WunWun closed, selling
assets to a competitor, in 2015. Food delivery is also proving to
be an expensive gambit for restaurants and grocers.
A host of companies have tried or are trying to automate
text-based concierge and shopping services by using human agents.
Facebook Inc. last year shut down a personal assistant dubbed "M"
within its messaging app that fulfilled tasks, such as making
restaurant recommendations or purchasing a birthday gift for a
friend, using AI software being trained with human interactions.
The service shut down but was useful to power other AI projects at
Facebook, a Facebook spokeswoman said.
"I know a full cemetery of companies that have tried to do that
and failed," said Alex Lebrun, former head of engineering for
Facebook Artificial Intelligence Research who recently started his
own Paris-based firm to build an AI system that integrates human
agents but doesn't totally replace them.
Today's AI technology allows companies to train text or voice
software to respond to narrow requests, for example, to ask what
color flowers a shopper wants to order, but so far can't handle the
broad range of questions humans tend to ask of a concierge-like
services, said Mr. Lebrun.
The businesses that have attempted speedy delivery or chatbot
concierges in the past didn't have a giant retailer like Walmart
behind them, said Ms. Fleiss. Walmart has existing retail and
supply chain infrastructure Jetblack can use, she said.
Marc Lore, head of Walmart's U.S. e-commerce business, had in
mind a Jetblack-like service before Walmart bought his e-commerce
startup Jet.com in 2016. That website sells products that appeal to
urban shoppers, including higher-end brands that won't sell on
Walmart.com.
Mr. Lore was fascinated by the idea of a premium service that
allowed shoppers to order products for speedy delivery by speaking
into the air, said people familiar with his thinking. "This is a
Marc Lore passion project," said one former Walmart executive.
Since at least 2017, Mr. Lore encouraged executives to build a
Jetblack branded, voice-enabled device similar to an Amazon Echo or
Google Home that members could use to order products, former
employees said. One prototype looked similar to a cylinder-shaped
Amazon Echo, but with more colored lights. Mr. Lore declined to
comment.
Jetblack considered a device, among other voice ordering
options, but decided text communication is more useful for now,
said Ms. Fleiss. The technology isn't ready, and "customers
actually weren't ready and didn't find voice currently to be
appealing," she said.
"When I'm laying in bed at night and I'm thinking about
something, rather than going to Amazon and searching, I just text,"
said member Julia LeClair, co-founder of a high-end fashion
e-commerce site and mother of a 1-year-old. She has asked for
recommendations on which sippy cup to buy and for help planning her
daughter's recent birthday party. Jetblack recommended a theme,
decorations and party favors, and then ordered the items for
delivery.
"You can definitely tell that some of the responses are from an
automated bot," said the 33-year-old, "but maybe it's not." Her
texts after 11 p.m. have received the response, "Bots need beauty
rest too. I will be quick to respond in the morning!"
Walmart said it uses automated texts at night when agents aren't
working.
One former Walmart executive said Jetblack is "the first thing
that we've tried that will unwind you" consistently from Amazon
Prime. "The early indication is that it has legs," even if the
point isn't earning profits, the former executive said.
Jetblack members are spending an average of $300 a week for
products because the ease of the service encourages more frequent
purchases, Mr. Lore said on the sidelines of a company party in
September. "We are ramping it up gradually," he said.
The average shopper is buying more than 10 items a week, said
Ms. Fleiss. Average spending a week is higher than last September,
said a company spokesman, but he declined to say how much Jetblack
members spend a week or how many of those products come from
Walmart.
Customer-service agents, often recent college graduates drawn to
the startup culture of Jetblack, need to become experts on wealthy
New York City moms. Agents have two weeks of training, in part to
learn what products babies need as they move through different
developmental phases so they can make better product
recommendations.
Moms -- the vast majority of members -- sometimes text fast
requests like "reorder cereal." When a Jetblack member joins, an
employee usually goes to the customer's home to inventory the
products the person uses, giving agents a database of frequent
purchases. Software automatically suggests a product if it is a
frequent purchase or was scanned in the customer's home. The
software gives agents "responses that match nearly every possible
situation," said a former employee.
It takes agents slightly longer to place an order for "item
requests," when the shopper knows exactly what they want but hasn't
ordered it before. Even more time-consuming are "recommendations,"
open-ended requests such as "I need a new yoga mat" or "I need a
birthday present for a 9-year-old."
Agents consult a file that combines past purchases, products
agents have researched and recommendations made by Jetblack
merchandising workers, then suggest around three items for the
customer to choose from, current and former employees said.
Sometimes agents head to Google to do research, said one of these
people.
Through the dialogue, the system is learning which follow up
questions to ask, said Ms. Fleiss. For example, if a shopper asks
for a new stroller, the system might learn to next ask "For how
many children?" and "Do you need your child to nap in the
stroller?" Members buy one of the recommended products 80% of the
time, she said.
Jetblack also learned it still needs traditional technology. It
created a companion app because some shoppers don't like to update
credit card information or review past orders over text.
Workers stock up on frequently purchased items by taking a daily
van to a Jet.com warehouse and Walmart stores in New Jersey, since
New York City has no physical Walmart stores, ordering products
online for pickup. Later this year Jetblack plans to use a new
Walmart fulfillment center in the Bronx to collect some products
faster, said a spokesman.
Current and former employees said they first try to buy products
from Walmart or one of its units but will buy products from any
stores Jetblack customers want. That includes Amazon, where
employees use Jetblack's Prime account.
Write to Sarah Nassauer at sarah.nassauer@wsj.com
(END) Dow Jones Newswires
March 21, 2019 11:38 ET (15:38 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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