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Wal-Mart Strikes Back at Amazon to Regain Its Mojo
Recent moves make it clear that Wal-Mart is taking notice
of Amazon’s 39 percent growth rate in 2007. This comes
at a time when Wal-Mart announced disappointing results for
2007 and offered guidance to investors about not meeting expectations
in 2008.
To regain its mojo, Wal-Mart plans to go on the offensive
with three major online initiatives, according to Brian Osborn,
Walmart.com vice president of marketing. Osborn spoke to a
gathering of online retail executives at last week’s
eTail conference in Palm Springs, California, about a vision
to make Walmart.com “the most valued and visited Web
site, and to make it easier for customers to shop online and
offline.”
Osborn’s vision involves focusing on three initiatives:
• Site to Store, an online purchase and in-store pick-up
program.
• Customer ratings and reviews that allow the retailer
to learn about products and customer satisfaction in real
time.
• Find in Store, which allows customers to determine
if products are available in local stores.
“These three initiatives bring the stores together with
the Web,” says Osborn. “Site to Store customers
are already in the stores once a week, so picking up products
is a natural thing to do. Customer reviews increase velocity
of purchase, click-throughs and conversion rates. And Find
in Store serves customers who come to the store one week to
look around and prepare to buy something on their next trip.”
A fourth initiative was recently reported in The Financial
Times, which noted that “Wal-Mart aims to emulate Amazon’s
global online expansion” by investing heavily in a “global
e-commerce platform.” The intent, according to the story
by Jonathan Birchel on January 31, is to seize “a multi-billion
dollar opportunity over the next three to five years.”
Are these initiatives enough to match Amazon and contribute
materially to Wal-Mart’s bottom line?
Wal-Mart doesn’t break out online sales figures, but
industry experts estimate its revenue to be between $1.5 billion
and $2 billion in 2007. Amazon’s revenue was $14.8 billion
in 2007. Walmart.com grew by 20 percent last year, while Amazon
grew by 39 percent.
Of course, Wal-Mart is the world’s largest retailer with
revenue of $348 billion in 2007. But its massive revenue masks
an area of weakness: net profit was flat in 2007 at $11.3
billion. Amazon’s profit doubled to $476 million.
Worth noting is that Wal-Mart’s growth is largely based
on opening 500 or more new stores per year, which means a
large portion of year-over-year growth is due to having more
units in the chain.
Although Walmart.com’s initiatives are significant,
they are not innovative, which is a major focus for Amazon.
Recent innovations by online giant include Fulfillment by
Amazon, third-party product offerings on search pages, the
Amazon Prime class of customers, and an Amazon tool kit offered
to developers.
Another speaker at last week’s eTail conference was
Larry Freed, president of the customer satisfaction firm Foresee
Results, who announced that Amazon was one of the highest
rated online merchants among the 40 his company tracked during
the recent holiday season. Walmart.com was near the bottom.
Customer satisfaction is the foundation upon which merchants
build their futures. Wal-Mart has a great deal of building
to do if it wants to catch Amazon.
– Joe Skorupa
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