The Click & Mortar Revolution: Brick and Mortars Get Serious about Going Online

Bobbin, August, 2000 by Jules Abend

CEO Millard Drexler said at the annual stockholders' meeting: "At the end of the day, frankly, e-commerce is just retailing. We are quite pleased with the marriage of online and stores."

So in an interesting shift, real, not virtual, retailers of all types are finding value in and flocking to the Internet. Furthermore, online strategies of many of these players are evolving. For example, the big box operators that early on tried to establish their sites internally, without much success, are now creating joint ventures and separate e-organizations, or acquiring companies with experience in direct marketing.

Wal-Mart, Target, Nordstrom Revamp Online Strategies

Along these lines, Wal-Mart made a dramatic move at the beginning of this year by partnering with Accel Partners, a leading venture capital firm in California's Silicon Valley, to form Wal-Mart.com. The online store is an independent company, based in Palo Alto, CA, rather than Benton, AR. And to head the new operation, Wal-Mart lured Jeanne Jackson away from Gap's Banana Republic division, where she was CEO and was also running Gap Inc. Direct, which includes the online businesses for Gap, Banana Republic and Old Navy, as well as Banana Republic's catalog.

Trying to go it alone since 1996, Wal-Mart's online history had been less than stellar. The company's Web site ranked only 43rd among online shopping venues last year, according to Media Metrix, and during the month of May 1999 saw only 801,000 visitors. By comparison, Amazon.com's visitor list totaled nearly 10 million for the same month.

The overhaul and relaunch of the Wal-Mart site is reflected in the changes already taking place in the company. More than 600,000 items now are stocked, which is more than double the previous selection, and represents all 25 categories in a store. Although the discounter's strategies are still being formulated, Theresia Ranzetta, an Accel partner, says: "What we see is that the separate company will use certain key assets of the parent to help accelerate and differentiate what the retailer can do online. For example, customers will be able to return products purchased on the Net to a Wal-Mart location instead of mailing them back. That's a first step. ... We want to give customers choices of whether they want to order online, how they want that order to be fulfilled, or whether they want to buy in the store."

At the same time, third parties such as Federated's Fingerhut will continue to provide soft goods fulfilment, and Books-A-Million, with expertise in distributing individual orders directly to consumers, will also be used by Wal-Mart.

In another example, in 1998, fierce competitor Target acquired St. Paul, MN-based Rivertown Trading Co., for about $120 million. This direct marketer, with national retail catalog operations and fulfillment services, owns the Wireless, Signals and Circa catalogs. The acquisition marks Target's first entry into a major catalog business, and strengthens the mass merchant's capabilities in the direct marketing and Internet retail channels.