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The Cutting Edge / Focus on E-Business

Revamped Wal-Mart Site Could Bring Stores' Dominance Online

Internet: Its huge customer base and veteran e-commerce team set the retailer up to become a major sales force on the Web.

November 23, 2000|TODD PACK | ORLANDO SENTINEL

Amazon.com has been dubbed the "Wal-Mart of the Internet," a virtual superstore selling everything from "Harry Potter" books to potting benches. But it could lose its standing to a start-up that promises an even wider selection at everyday low prices. Before long, the Wal-Mart of the Internet may be . . . Wal-Mart.

Wal-Mart Stores Inc., the world's No. 1 retailer, reopened its e-commerce site this month, a move that could change online shopping just as its discount stores transformed small-town America.

"You can bet everybody on the competitive landscape is watching what Wal-Mart is doing," said John Lawrence, an analyst with Morgan Keegan & Co., a Memphis, Tenn., investment firm.

With its brand name, built-in customer base and bargain prices, Walmart.com could siphon millions of customers from other "dot-coms" and become a major player, analysts said.

This has been a chaotic year for online shopping. Scores of dot-coms have closed or sold out to better-funded rivals, and others are bleeding money--even as electronic commerce enters the mainstream.

One example: Amazon. It has more shoppers than any other site and sales have almost doubled from a year ago. But so have its losses. It has lost $866.1 million on sales of $1.8 billion since Jan 1.

Wal-Mart, on the other hand, showed a profit of $5.4 billion on sales of $165 billion in the year ended Dec. 31.

That gives it a big advantage when it comes to making a name for itself online, said Robert Labatt, research director at GartnerGroup Inc., an e-commerce consultant based in Stamford, Conn.

"Wal-Mart can afford to get a little bit wrong before they get it right," Labatt said. Web sites generally lose tens of millions of dollars in their first few years of operation.

Wal-Mart doesn't release online sales figures, but even if its losses approach those of Amazon, they would constitute only about 16% of the company's profits.

One other advantage is that about 100 million people visit Wal-Mart's U.S. stores every week, Lawrence said. That gives the company the chance to plug its Web site without spending millions of dollars on outside advertising.

Wal-Mart's size also means it can wheedle deep discounts from manufacturers, letting it sell merchandise online cheaper than almost anyone, he said.

"They've got the marketing clout," said Seema Williams, an analyst with Forrester Research, an e-commerce consultant based in Cambridge, Mass. "They could be a major player online, if they decide to be."

It hasn't always been clear whether Wal-Mart was serious about e-commerce. The company revamped its e-commerce site several times after launching it four years ago, but it never made online shopping a top priority. The last update was unveiled Jan. 1--just after the holiday shopping season.

That most recent version of Walmart.com was a big improvement over previous incarnations, Williams said. It offered more products, lower prices and even a virtual Wal-Mart greeter on every page.

But there was a lot wrong with the site, she added. The search feature didn't always work, for example, and some shoppers were turned away because the site was overcrowded.

Walmart.com made scads of minor mistakes, Williams said. Its registration page wouldn't allow "Ms." as a title. Product descriptions were so poorly written that a search for something as simple as "scissors" would turn up not a pair of shears but a compact disc with a song titled "Scissors Cut."

Still, Walmart.com ranked 47th among all e-commerce sites in September, the last month it was up, with 1.4 million individual visitors, according to Media Metrix Inc., which measures online traffic.

No. 1 Amazon had 15.3 million visitors that month.

Expectations for the revamped site are high. A big reason is that the Bentonville, Ark., company has broken out Walmart.com as an independent company co-owned by Accel Partners, a leading venture capital firm based in Palo Alto.

The online venture has moved from Arkansas to Silicon Valley. Shipping is handled by two outside fulfillment centers, though some merchandise is shipped directly from the manufacturer.

Last spring, Walmart.com brought in a new chief executive, Jeanne Jackson, who had overseen Gap Inc.'s Banana Republic division since 1996. Jackson also managed Gap's e-commerce programs.

Wal-Mart also has profited from the downturn in e-commerce stocks by recruiting "major-league" employees from struggling dot-coms, Lawrence said. "They assembled a world-class team," he said.

Walmart.com officials wouldn't comment, but Jackson said in a statement: "We want shopping at Walmart.com to be as easy, fun and valuable as shopping at our stores."

She called the redesign "an important, evolutionary step in developing an online store that delivers the Wal-Mart promise."

Merchandising could be a big obstacle to delivering on that promise. Wal-Mart is where people shop for staples such as laundry detergent and socks, but people may not bother with ordering such products online, Lawrence said.

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