Wal-Mart on-line still looking for $$$.com; next on the agenda: 80,000 skus

Discount Store News, March 3, 1997 by Ed Rubinstein

Two years ago this June, Wal-Mart launched into cyberspace with www.wal-mart.com. Back then, the Internet infatuation for Wal-Mart and other merchants was to gain a toehold on the Web and make it an extension of marketing efforts. Now a more opulent on-line foray is slated for later this year or next year when the company will make some 80,000 products available through its Web site--in short expanding the number of skus it sells on line by more than 2,100%.

Last July, Wal-Mart became the first and then-only discount chain to launch commerce-enabled sites. The Wal-Mart and Sam's Club sites initially offered approximately 1,500 skus and 2,000 skus, respectively, each under six categories. At the time, Wal-Mart president and ceo David Glass said the Internet venture eventually would represent a "significant portion" of the company's revenues.

That prediction may one day hold true as the depth and breadth of merchandise offered at the two sites expand considerably. The Wal-Mart site now features 21 categories, including rotating seasonal sections, time-sensitive specials and a "What's Hot" page. Examples include: an Iomega Zip Drive, priced at $137, after a $50 mail-in rebate from the manufacturer. Last month, a Valentine's Day area offered 33 skus of men's and women's fragrances and 15 skus of women's sleep/lounge wear from Intimate Moods.

Other new areas include a flower shop, jewelry, books/music/video and a gift certificate section with a 1996 Holiday Barbie limited-time offer for $32.86. The Barbie offer allows surfers to purchase a certificate that must be sent to Mattel by May 1. The site even has a limited amount of basic apparel, such as men's, boys' and girls' Hanes underwear. A six-pack of men's Hanes briefs sells for $7.88. A new armed forces area offers theme post cards and calendars of the U.S. Army, Navy, Coast Guard, Air Force and Marine Corps.

Sku counts at Sam's On-line since the initial launch have not changed considerably, and products are segmented in the same six areas--electronics, sports/leisure, home, office, personal and specialty--with an emphasis on higher-ticket merchandise than wal-mart.com. The sole new Sam's area is the gift certificate section, the only area that overlaps the Sam's and Wal-Mart sites, allowing surfers to purchase Sam's Club or Wal-Mart gift certificates of up to $50.

Wal-Mart has been mum on sales generated through its Internet site. Even an educated guess would put its cyber-sales (for both sites) at less than 1% of its total volume. which for fiscal 1996 totaled $104.5 billion.

"Our on-line business is not a significant part of our sales, but we are certainly excited about the Internet," said Celia Swanson, who last month was promoted to senior vp, membership, marketing and administration.

Given the larger merchandise mixes of the sites, the Wal-Mart site is likely generating greater sales volume than Sam's Club On-line, but the Internet-only and larger-ticket merchandise at the Sam's site could be reaping larger margins.

Cybersales are expected to escalate exponentially over the next several years and into the next decade. The driving factors: the prospect of secure Internet payment standards developments in digital micropayments; and an increasingly diverse population that is going on line and getting comfortable with the Web environment.

Certainly, recent studies support Wal-Mart's growing Internet investment. Among them:

* Forrester Research of Cambridge, Mass., predicts that consumer cybersales will grow to $7.17 billion by the year 2000, a 13-fold increase from sales of $530 million in 1996.

* The Yankee Group of Boston estimates that consumers will account for $10 billion in electronic commerce sales and that they spent $730 million in 1996.

* New York-based Jupiter Communications noted that $1.2 billion in consumer on-line transactions were completed last year. Its forecast for the turn of the century: $7.3 billion.

Even though these projections are just a sliver of the roughly $2 trillion spent each year in retail transactions Wal-Mart jumped into the rapidly evolving cybersales market early. More importantly, it is using the Internet in a complimentary way to its stores by having only a small amount of duplication of products and by offering Internet-only specials, such as collectibles and sports memorabilia.

Analysts contend that Wal-Mart's vast distribution capabilities and technological prowess best positions it for cybersales compared to other discounters. But will Wal-Mart attract cybershoppers? Nicole Vanderbilt, an analyst with the digital commerce group of New York-based Jupiter Communications, said, "Customers are usually looking for the lowest price, and given Wal-Mart's value statement, the sites should continue to generate traffic."

Glass puts his name at the bottom of a letter of thanks that is automatically sent by e-mail after each on-line order. In the letter, Glass reminds consumers that the main objectives of Wal-Mart On-line are "to provide low prices, great merchandise and superior convenience." Purchasers at the Sam's site receive a similar letter from its president and ceo, Joseph Hardin.