Wal-Mart's online experience is proof that success in the brick and mortar world doesn't create corresponding success in e-commerce.
Offline, Wal-Mart is a sprawling giant, the world's largest retailer. Its U.S. stores number 3,300 and it employs more than one million workers, which means about one out of every 300 Americans is a Wal-Mart employee.
"It's a real category killer," claims Gartner research director Geri Spieler, who says that that Wal-Mart's success is "what everyone is trying to compare to." Leveraging that success, Wal-Mart insists that any company that wants to be a supplier use the Wal-Mart EDI (electronic data interface). So Wal-Mart can replenish its stock - straight from wholesalers - faster than you can say "discount retail."
And the giant is getting bigger, Spieler says. Wal-Mart is expanding its line to include designer clothes like those sold in Old Navy, and building its new stores with the capacity to offer more groceries. Wal-Mart plans on opening 70 new supercenters in 2003.
The company markets like the behemoth it is. According to Wal-Mart spokesperson Cynthia Lin, the company mails 90 million copies of its ad circular every month - meaning it's probably one of the most widely circulated publications in America.
Wal-Mart's dominant place in offline retail might be expected to provide it with top dog e-commerce status. But analysts say Walmart.com is distinctly back of the pack in terms of total online sales, and a list of traffic figures for leading e-commerce sites released by comScore Media Metrix for September supports this.
At the top is e-commerce wunderkind eBay, with 34.4 million visitors, followed closely by Amazon (the site most closely resembling Walmart.com) with 25.6 million visitors.
Working down the list, Yahoo Shopping had 24.5 million, Dell had 11.4 million, Barnes and Noble had 8.2 million, and MSN Shopping had 7.3 million.
Down at #13, with 6.5 million visitors, is Walmart.com. A respectable showing, to be sure, but anemic considering that the company has been a household name for decades, and that Walmart.com has been selling online since July 1996.
Different Customer Base
Wal-Mart's offline retail success isn't replicated online because, says Spieler, "that's not where their customer base is."
She notes the typical online shopper is a very different creature than the typical Wal-Mart customer. "People who shop at Wal-Mart like to go to the store," she says. "Wal-Mart caters more to people with large families and people who aren't in much of a hurry."
The average online shopper tends to have greater expendable income and place more emphasis on saving time, she says. Many online shoppers fall into the "time-stressed" category of baby boomers that like having items delivered.
As for the other reason that Walmart.com isn't an online leader, Spieler echoes a sentiment voice by many e-commerce analysts. In general, she says, the members of the retail segment are "technology laggards." "They're not as techno savvy as their Web sites would have you believe."
The Spin Off Returns
Indeed, Wal-Mart, like many companies, has had its share of challenges in its online operations. In the 1999 holiday season, it had to warn consumers that it could not guarantee delivery of orders placed after December 14th - unusual for a retailer with such well developed infrastructure.
Wal-Mart, seeking greater online expertise, spun Walmart.com off as a separate company, selling a minority stake to tech-savvy Accel Ventures in January 2000, moving the site's headquarters to Silicon Valley.
But, in what was widely seen as an unusual tactic, Walmart.com shut down for a month in the fall of 2000 to revamp the site. That a major e-tailer would shut down its site in a holiday ramp-up period, instead of readying a platform beforehand, left some industry observers puzzled. (And the site still had numerous hour-long black outs after it came back online.)
In 2001, Wal-Mart bought back Accel's minority stake, so Walmart.com is once again a wholly owned subsidiary of Wal-Mart. Lin explains that the buy back was due to Wal-Mart's desire to focus on integrating its online and offline sales channels.
Gartner's Spieler is of the opinion that Accel wasn't doing a good job with it. But, whatever the reason, Walmart.com, with or without outside help, appears to have a strategy for moving the site forward.
A Hint of Hipness
Certainly, the Walmart.com site would never be described as high tech. It still lacks the customer personalization features used by Amazon, and its straightforward blue and white design gives it a dowdy look.
Yet it does have a touch of trendiness. Walmart.com recently launched a Netflix-style DVD rental plan. Users order DVDs through the site and receive them in the mail, keeping them as long they want with no late fees.
Considering that Netflix itself has yet to make turn a profit, Walmart.com's new venture is forward looking. And in true discount fashion, Walmart.com is undercutting Netflix's price by about a dollar.
The site also offers Internet access. For $9.94 a month, you can buy unlimited dial-up service through Wal-Mart Connect, which is AOL service offered with the Wal-Mart brand. But the site slashes AOL's price in half by offering a bare bones ISP client without bells and whistles like instant messaging and e-mail filters.
The Real Secret
The giant discounter's true strength online is in its bricks 'n clicks integration, tying its Web site into its real world stores. "We recognized that one of the greatest values is in integrating the online and offline channel," says Wal-Mart's Lin.
You can, for example, chose replacement tires at Walmart.com and have them installed at a local Wal-Mart. The site's pharmacy section lets you place an order to be picked up locally; you can also view your prescription history online and set up e-mail reminders for refills. The site's vision center offers a similar service for contact lenses.
You can drop off photos to be developed at Wal-Mart and see the finished prints at Walmart.com, where you can e-mail them to friends or make them into gift cards. If you buy an item at Walmart.com, you can return it at a local Wal-Mart.
If there's an item your local Wal-Mart is out of, it's likely that the site has it. Walmart.com stocks 500,000 books and 80,000 CDs, not to mention replacement lawn mower blades, hot tubs, women's shoes, and Harry Potter Lego sets. Though the site doesn't release inventory figures, it's probable that it has the largest inventory of any retailer, online or off.
With the power of this integration, leveraging its massive offline presence to compliment its e-commerce operation, it may not matter that Walmart.com lags its online rivals. It is, after all, an effective part of an overall retail operation that is expected to generate $218 billion in revenue in 2002 (to put that in perspective, Microsoft's expected revenue is a paltry $28 billion). With a jaw-dropping revenue figure like that, Wal-Mart can afford to take its time in growing its online market share.
Come Closer: With Next-Shoring, Proximity to Demand, Innovation, and Talent Are New Manufacturing Imperatives Manufacturing companies have always prioritized nearness to supply and demand when developing their siting strategies. Now, new imperatives such as...
Avoid the Sales/IT Collision Scenario: Using Apps for Better Collaboration What's great for sales productivity isn't always good for IT. Nearly 56% of sales teams agree that slow connections are one of the biggest issues...
Video: Rodney Joffe Explores Cybercrime's Underground Economy More and more criminals are using DDoS attacks as a distraction or "smokescreen" for other cybercrimes like theft of data or even funds. Watching...
App Security and Malware Propagation Cybercrime is getting big and bigger. 2013 was the year of the Mega Breach with eight top data breaches resulting in the loss of tens of millions...