PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
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In addition, Wal-Mart’s store and online IT departments integrated the POS systems for Walmart.com and for each store’s photo lab, a project that took about two months and mostly involved building a secure messaging system between the POS systems, says Karl Bedwell, director of specialty systems for the Wal-Mart stores division. “We wanted our customers to have a choice of where they pay,” he says. A mother in Michigan could pay online for photos of her children, and choose to have the photos printed at a Florida Wal-Mart store, where Grandma and Grandpa could pick up the printed photos pre-paid, he adds.
But Wal-Mart wasn’t satisfied with just offering one-hour store pick-up for online orders; it also wanted to give customers an entirely new online digital photo experience on their home computers. Working with Fuji Film E-Systems, another division of Fuji Film U.S.A., it co-developed software to let online customers use their home computers to load digital photos, edit them, organize them into albums, and order prints for home delivery or store pick-up within one hour or the conventional two-day store pick-up service, all without having to toggle between different software applications, Lisuzzo says.
In late October, eight months after the project’s launch, Wal-Mart and its web sites, Walmart.com and SamsClub.com, went live with the one-hour store pick-up service. Customers have responded better than expected, Lisuzzo says. “We’re seeing about 80% of online orders now picked up at stores, with about 60% of those being one-hour pick-ups,” he says. “The response from customers has been incredible. The initial numbers tell us this was the right thing to do.”
So far, the company has been pleased with the return, Lisuzzo says. “We took the lead in this because we saw the photo business as a way for us to differentiate from our competitors,” he says. “The company realized this would offer a good return on investment and so was willing to support it. The company is very supportive of things that put Wal-Mart in the lead, and this is definitely an initiative that puts us ahead of the competition.”
A side benefit, Lisuzzo adds, is that the increased store traffic to the photo section has resulted in a hike in digital camera sales.
While the digital photography offering has been the most dramatic success in Wal-Mart’s multi-channel strategy, it is developing other initiatives to take advantage of its size, its clout and the web. One of the most innovative is the deal it struck last year with Gillette Co. to include coupons for song downloads at Walmart.com in Gillette products not normally associated with music: Duracell batteries, Oral-B electric toothbrushes and Mach3Power battery-operated razors. Digital music coupons range in value from one to three downloads, depending on the value of the purchased product.
The promotion allows Wal-Mart to extend digital music offers throughout its stores. Since batteries are merchandised in several store sections, for instance, shoppers see digital music promotional signs in multiple departments as well as in checkout lines. Wal-Mart is still evaluating the success of the cross-channel promotional program with Gillette and will soon decide whether to launch similar promotions with other product categories, a spokeswoman says.
A further area where Wal-Mart is protecting its base with a web strategy is with store pick-up of contact lenses and pharmaceutical prescriptions ordered online. Analysts say that is helping Wal-Mart maintain its stores’ market share in those areas as it faces steep competition from the ever-widening chains of CVS and Walgreen, both of which have retail web sites that let customers order online for home delivery or store pick-up. CVS operates more than 5,000 U.S. stores; Walgreen operates more than 4,500. In addition, pure-play online retailer Drugstore.com lets customers order online for pick-up at more than 3,000 RiteAid stores.
Wal-Mart is also moving into other areas online where it makes sense. For instance, customers can order automobile tires online for free shipping to a Wal-Mart Tire & Lube Express location. Customers don’t need to schedule installation, the company says, they can just show up and expect their tires to be installed.
To further promote online shopping, Wal-Mart distributed pre-Thanksgiving shopping fliers featuring exclusive offers on Walmart.com in several markets, including New York, Chicago and San Francisco that don’t have Wal-Mart stores. On the day after Thanksgiving, Walmart.com had 1.4 million visitors, making it the third most-visited shopping site behind eBay.com, with 5.4 million visitors, and Amazon.com, 2.6 million, according to Nielsen/NetRatings.
Although Wal-Mart’s online presence is still far from its potential for generating sales, its strategy of taking steps toward being a more effective Internet and multi-channel retailer will eventually pay off, analysts say. “They’ll continue to build synergies through their stores and Walmart.com,” Yannas says. “They keep trying until they succeed. They’re relentless.”