The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
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Now, Walmart.com seeks to integrate with stores as tightly as possible. Today, says a Walmart.com spokeswoman, Wal-Mart uses its web site strategically to add value to its store offering, whether added value is in the form of a broader assortment of merchandise than in stores, expanded product categories or services that can easily be accessed online though not necessarily in stores. “Those areas are where we’ve been focusing our energies online,” the spokeswoman says.
Take books. The average Wal-Mart store carries 1,000 to 1,500 titles, but Walmart.com offers more than half a million of them, working with an outsource supplier that ships direct, as it does in several categories. Ditto the more than 13,000 movie titles and 80,000 music recordings at Walmart.com, which beats the stores’ assortment hands down.
Wrapping in content
Furniture requires lots of space for display in stores, but since space is virtually infinite online, Walmart.com offers an expanded selection that includes large pieces such as sofas, loveseats and mattresses that aren’t available in stores. Similarly, big screen TVs are a growing category online because while the stores have only a few models on display, Walmart.com offers several.
Toothpaste and mouthwash may be no-brainers that sell on price alone. But where it matters, Walmart.com develops content to wrap around products that represent more expensive and/or considered purchases that can then be purchased online or off. To promote the sale of its Keepsake Diamond engagement rings, for instance, Walmart.com offers a jewelry configurator that lets customers design their own ring. And thanks to content assets purchased from the defunct Garden.com, shoppers can get information on garden plants that will thrive in their part of the country by entering their ZIP codes under Walmart.com’s garden tab, while in-season, live plants can be ordered online or purchased at the store. The site also offers a digital camera buying guide.
In addition to supporting the sale of selected bigger-ticket items by letting consumers research them online, Wal-Mart has used the web to expand into new product categories. Computers at Wal-Mart can be purchased only online. Wal-Mart worked with computer manufacturer Microtel and web developer Lindows earlier this year to bring Walmart.com shoppers a computer with an open-source Linux-based-and therefore less expensive-operating system pre-installed. Shoppers can even buy the OS as a stand-alone, but only on the web. “Computers are not a major thrust at Wal-Mart’s brick-and-mortar stores, but they are one of the primary categories Wal-Mart sells online,” Cassar says. “The Internet will help it get its foot in the door in certain categories that are only a small percentage of its offline business.”
Online’s incursion into new territory doesn’t stop at products. A pilot DVD rental service debuted online last October, after the company tracked industry figures quantifying consumers’ shift to the DVD format. To its existing online photo development service, Walmart.com also last year added online prescription fulfillment and optical services, as well as a tire service in which tires can be ordered online for installation at designated Wal-Mart stores.
While the site steers clear of categories such as inexpensive health and beauty aids, and the groceries responsible for much of the company’s growth over the past several years, a greater number of items and services in many categories are now available online at Wal-Mart than off. The newer web offerings align with a larger corporate focus in which Wal-Mart seeks to grow by continually testing the outer limits of what consumers are willing to allow Wal-Mart to be, according to Retail Forward.
Minor ad budget
With universal name recognition, Wal-Mart doesn’t spend a high percentage of its revenues on advertising. “It’s about 0.3% of revenues. With a sales base of about $250 billion, that’s $750 million in actual numbers,” says research firm Morningstar Inc.’s Tom Goetzinger. “It might sound like a lot, but it’s next to nothing.” Much of that figure goes into Wal-Mart’s warm and fuzzy image-enhancing television advertising, but it’s Wal-Mart’s monthly circulars, distributed mostly via inserts to some 90 million households, that get shoppers into their local stores for specific promotions.
Mention of Walmart.com in the circulars is carefully tied only to what’s available online. “It’s not even mentioned on the commodity pages or the apparel pages, but on the baby page where they’re selling strollers and car seats, they tell customers to find more car seats and cribs at Walmart.com,” says Whitfield. “They can’t show everything they have in the flier, so they are using the web to augment what they can show by telling people to look, even decide, online, then go to the store.” It’s an example of what has become a winning strategy for multi-channel retailers, says Retail Forward: educating consumers about what’s worth going online for versus when it pays to go to the store.
“The circulars are a particularly effective form of advertising in terms of cost of sale, because once they get someone into the store, the ads are so much cheaper,” says Goetzinger. “If I crank out just as much in circulars, but my total sales base is $25 billion, that 0.3% becomes 3%. Once Wal-Mart gets people to the store, the average ticket is going to dwarf the ad cost of getting that person into the store.”
The web has a supporting role in that dynamic because two years ago, Wal-Mart extended the reach of the already widely-distributed fliers at virtually no cost by putting them online. Much of that traffic takes the next step toward purchase by using the site’s store locator, a feature that in total gets about 1 million uses per month, Wal-Mart says. The web also delivers e-mail marketing messages to registered Walmart.com customers based on a combination of customer history, target audience and seasonal promotions.