February 1, 2005, 12:00 AM

Chasing the formula to thrive in a Wal-Mart world

In a retail world where Wal-Mart sets the pace on pricing, leaving little room for merchandising mistakes, even the best retailers must constantly review their operating performance and be flexible, top retailers said at the Shop.org online retailing conference in New York last month.

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In a retail world where Wal-Mart Stores Inc. sets the pace on pricing, leaving little room for merchandising mistakes, even the best retailers must constantly review their operating performance and be flexible and smart enough to change when necessary, top retailers said at the Shop.org online retailing conference in New York last month.

Mary Lou Kelley, vice president of e-commerce at L.L. Bean Inc., appearing on a panel with executives from Best Buy Co. Inc. and Sharper Image Corp., warned of the growing pressure on Internet retailing by the trend among mainstream retailers, including Wal-Mart and Sears, Roebuck and Co., to continue their aggressive move into online retailing. “We all have to understand and be ready for what Walmart.com will be doing in five years,” she said.

One way L.L. Bean answers the growing competition is to review its web pages on a daily basis to see how it can improve merchandising and customer service. A new “save for later” shopping bag, for instance, caters to shoppers’ need for flexibility and control over how they shop, Kelley said.

Best Buy has taken several steps to perk up sales, said John Thompson, senior vice president of Best Buy and general manager of BestBuy.com. It replaced global free shipping a few months ago with a free-gift-with-purchase program that has exceeded the free-ship offer’s impact on sales, he said.

Other improvements are on the way. Best Buy had a 30% year-over-year increase in holiday season gift card sales, but because customers can only redeem gift cards in stores, it has been able to recognize a revenue boost only in stores. “It’s a huge issue for us that will be corrected by mid-year,” he said.

At Sharper Image, online sales for the 2004 holiday season were off their usual pace, rising only 3.5% year-to-year instead of a more usual 35%, said Roger Bensinger, senior vice president of marketing. Part of the reason for the fall-off, he said, was low supplies of Apple Computer Inc.’s iPod digital music player, one of the season’s hottest products.

But Bensinger added that Sharper Image also could have e-mailed customers more frequently during the holiday season, instead of sticking to a once-a-week schedule. One of his goals for this year, he said, is to conduct more personalized e-mail marketing campaigns to segments of customers, a tactic that would allow Sharper Image to increase e-mail frequency without alienating customers, he said.

 

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