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Wal-Mart to shake up e-commerce

By Kevin Kenyon

Many predict Wal-Mart’s new Website will revolutionize e-commerce.

Jan. 1 may be remembered one day not as the dawning of a new millennium, but for being the day the world’s largest brick-and-mortar retailer began its quest for online supremacy.

Barring any last-minute setbacks, New Year’s Day will mark the relaunch of Wal-Mart’s much-anticipated Website, which many experts believe could eventually revolutionize e-commerce. If Wal-Mart is as successful here as it has been in other new ventures, it may shift the balance of power away from newer cyberbusinesses, such as Amazon.com, to traditional retailers with long-standing ties to the commercial real estate industry.

Wal-Mart’s ability to tie in its 2,925 stores, which are visited by 100 million people per week, should give the company a stronger foundation to build on than other Web ventures, according to Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting firm based in New York City.

While the vast majority of e-commerce players are losing money, Wal-Mart, with $150 billion in annual sales, has the financial clout to outlast any competitor, Davidowitz said.

“There’s no question that Amazon.com and other Internet players should be worried,” he said. “When it comes to handling huge volumes and economies of scale, there’s no one who does it better than Wal-Mart.”

By all indications, the retailer plans to take full advantage of its shopping center locations by cross-promoting the new Website at its stores, including offering Internet workstations where customers will be able to order merchandise. Customers will also have the option of picking up or returning items to stores, the company said.

Although the track record of brick-and-mortar retailers on the Web has been mixed, if there’s one retailer capable of striking fear into e-tailers, it may very well be Wal-Mart, at least if the Bentonville, Ark.-based discounter’s foray into the supermarket industry is any indication.

The mere threat of Wal-Mart as a grocery retailer has already sparked widespread consolidation in the supermarket sector, first in the United States and now in Europe, essentially turning the industry inside out in less than a decade. The chain’s entry into a new market is so imposing that some analysts have likened it to the arrival of “the black plague of death.”

Now, with the retail behemoth setting its sights on revolutionizing e-commerce, many believe it will only be a matter of time before Wal-Mart dominates online as well as it has offline.

“Considering Wal-Mart’s track record, it would be hard to argue with the idea that they will make a significant impact on e-commerce,” said Kurt Barnard, retail consultant and president of Barnard’s Retail Trend Report in Montclair, N.J. “If I were Amazon.com I would be worried, especially after what happened in the supermarket sector.”

At press time, the first details of Wal-Mart’s long-awaited Internet strategy were beginning to emerge. In October, the retailer revealed the particulars of its strategy to a group of industry analysts, as well as its plans for an aggressive store expansion campaign next year.

Although its current Website, www.walmart.com, is already up and running, the revamped site is set to make its debut Jan. 1, just following the holiday shopping season. The retailer had originally planned to open the site in time for the holidays, but Wal-Mart spokeswoman Melissa Brown said company officials were “more concerned with doing it right than doing it fast.” Wal-Mart officials declined to comment further.

However, some of the changes, including a broader selection of electronics and toys, will be implemented in time for this holiday season, she added.

The inclusion of toys is no accident, according to John Konarski, ICSC senior vice president and director of research. “All indications are that Wal-Mart plans to go head-to-head with eToys and Toys R’ Us this Christmas,” he said. “This year looks to be the year that toy sales really start to shift over to the Web, and they obviously want to be a part of that.”

The revamped site is expected to offer six times as many products as are found at its brick-and-mortar stores, and 10 times the number of books, music, video games and video titles Wal-Mart.com now offers. By the end of the first quarter, it will boast more than 600,000 items, the company said. For fulfillment and warehousing — always an issue with e-commerce retailers — the company has hired Fingerhut, which is a division of Federated Department Stores.

Plans eventually call for offering travel services, including reservations for airline tickets, hotels and car rentals, as well as an online pharmacy that would give shoppers the option to receive prescriptions by mail or pick them up at local Wal-Mart stores.

Wal-Mart.com could pose a threat to Websites specializing in toys.

Wal-Mart also appears ready to challenge Seattle-based Amazon.com for supremacy in the online bookselling arena. In July, the retailer formed a strategic alliance with Books-A-Million, the third-largest book retail chain in the United States, to provide Wal-Mart’s online customers with access to a vastly expanded number of titles. Under the terms of the deal, Books-A-Million will provide Internet fulfillment services from its Florence, Ala., distribution center.

In addition, Wal-Mart plans to redo the site for its Sam’s Club warehouse chain, and is considering holding online auctions through Sam’s.

Wal-Mart also said it planned to open, remodel or relocate as many as 340 stores next year as well as expand the number of distribution centers it operates.

While only time will tell what effect Wal-Mart’s new site will have on the retail landscape, Davidowitz predicts it will have a significant impact. Pure Internet retailers, who are driven more by top-line, rather than bottom-line, growth may be at a disadvantage in the long run, he said. “When you’re driven by top-line growth, with a basic product that is not differentiated, you’ve got real problems selling against a Wal-Mart,” he said.

Much like the situation in the supermarket industry prior to Wal-Mart’s entry, Davidowitz said other players clearly have a head start. However, he noted, that meant little the last time around.

“There’s going to be a big shakeout in e-commerce eventually, and I can tell you that Wal-Mart is not going to be shaken out,” he said. “Right now Wal-mart is behind the curve, but if I were Amazon.com I would be sweating, because two or three years down the road it could be an entirely different situation — and I wouldn’t be surprised if Wal-Mart ends up being the driving force behind it all.”