Cyber hurdle suddenly seems less high - Wal-Mart - Online

DSN Retailing Today, Jan 26, 2004 by Mike Troy

It is hard for a company the size of Wal-Mart to do anything quietly. Yet during the three years since the bottom fell out of the Internet boom, Wal-Mart, without any fanfare, managed to transform a once highly criticized online presence into one of the Internet's most heavily visited sites.

This past November, traffic to Wal-Mart.com hit new highs as customers were exposed to products such as a 6.3 megapixel Canon digital camera, a $4,478 hot tub or a one-carat diamond ring in a platinum setting for $3,288. They could have purchased a Movado watch, a Mont Blanc pen or referred to one of 20 different buying guides to help make a decision about which Bible or global positioning satellite system to buy. They also have the ability to rent a DVD, download music, get a prescription refilled, have digital photos printed at a nearby store, order custom window treatments or buy a seven-piece bedroom set.

It is this combination of differentiated merchandise from that found in stores blended with special services and information that has helped Wal-Mart.com steadily attract more customers. During November, traffic at Wal-Mart.com increased to 15.5 million unique visitors, ranking it 25th among the top 50 U.S. Internet properties, compiled by comScore Networks, a company that monitors the online activity of 1.5 million people. Throw in Samsclub.com and Wal-Mart's corporate site and the number of visitors totaled 17.2 million--moving Wal-Mart's ranking up to 20. That is still well short of eBay, ranked fourth with 65.453 million unique visitors, and Amazon ranked eighth with 40.681 unique visitors. However, Wal-Mart's ranking and traffic place it in front of other conventional retailers such as Target.com, ranked 42nd with 11,661 million unique visitors and Best Buy and Sears, ranked 47th and 49th with 10.601 million and 10.407 million unique visitors, respectively.

"From the customers' perspective, what we do is offer easy access to more Wal-Mart," said John Fleming, president and ceo of Wal-Mart.com. "We expand what customers can do with Wal-Mart through information, selection and service. From a store's perspective, we give Wal-Mart access to more customers."

Although Wal-Mart has never released sales figures for its online unit, with the growth in unique visitors the company now finds itself in a position that seemed unlikely at the height of the Internet bubble. Wal-Mart has had little to say about its online unit the past three years, even as its strategy shifted away from essentially offering everything found in its brick and mortar stores to one that offers higher-end merchandise. For example, the best-selling digital camera online costs more than $500, but the most popular model in stores is less than $200. The same is true of diamond rings, with stores focusing on those in the $100 to $500 price range, but online prices range from $500 to $3,000. In addition, Wal-Mart.com traffic has never benefited from glowing press accounts the way Amazon and eBay have. Despite a lack of free publicity, Wal-Mart's unique and still largely unexploited advantage over competitors is the potential to leverage the more than 100 million people who visit its 3,500 U.S. stores every week.

According to Fleming, about 50% of Wal-Mart customers were online in 2000, but today that number is 70%.

"We know there are a lot of Wal-Mart customers who are online that don't know about [WalMart.com]," Fleming said.

The challenge is to persuade a larger percentage of those people to visit Wal-Mart.

"We have not cracked the code on that yet. We have to figure out a way to leverage the stores' traffic," Fleming said. "It is really an awareness issue, because a lot of people don't know what we have and what we can do for them. We have not spent a lot of money on marketing."

Even though a big-budget advertising campaign could create a surge of traffic, don't look for such an investment anytime soon. Wal-Mart shuns most advertising, especially price and item promotions, since they run counter to the company's everyday low cost and everyday low price business model. Instead, the strategy is to steadily add products, services and information that make sense online and complement what the stores are doing.

"We are focused on a deep integration with the stores because that helps customers do more with Wal-Mart," Fleming said.

As an example he cites customers who view their digital pictures at home, send them to Wal-Mart.com and then pick up prints at a store.

"This whole notion of cross-channel integration and giving people choices to shop Wal-Mart on their terms--that is really the big idea," Fleming said.

It also means being selective about product categories and assortments and prioritizing opportunities. That means a category such as apparel, which represents a huge part of Wal-Mart's sales, is nowhere to be found on its Web site, although it was several years ago.

"We continue to evaluate it and when the time is right we will get back into it," Fleming said. "We are really building out one business at a time, focusing on it, getting it right, improving it for our customers and then we will get to the next one. We have a list longer than my arm of business opportunities."