A Profitero study showed Target’s online prices were 25% more expensive than Wal-Mart’s, which were just slightly more expensive than prices on Amazon.
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That would mean Wal-Mart within a few years both breaking through political opposition to establish its stores in big cities and overtaking Amazon, which is constantly raising its game. Even for Wal-Mart, that’s an ambitious agenda.
Walmart.com: threat or opportunity for other e-retailers?
Courtney Arthur had seen the $4 DVD bins at Wal-Mart stores, so the marketing manager at online retailer DVD Empire wasn’t surprised in November when Walmart.com slashed prices on blockbuster new DVDs from list prices of around $30 to under $10.
How did DVD Empire respond? “We talked about it and decided just to let them go to war with whoever they wanted to, and we’d just keep our eye on the prize of customer service and customer experience.”
For DVD Empire, that means stocking more than 60,000 DVDs, many of them obscure titles, and providing lots of information. Product pages include such information as a plot synopsis, cast, special features, and the names of writers, producers and co-producers, as well as scans of the front and back of the DVD.
More online retailers are likely to be facing such pricing pressure as not just Wal-Mart, but such retail chains as Sears Holdings Corp., Target Corp. and J.C. Penney Co. Inc. beef up their e-commerce sites. How do smaller companies compete? The way DVD Empire does, by being good at what they do, observers say.
“They have to compete to their strengths, not get hung up with keeping up with the Wal-Marts, because they can’t,” says Jim Okamura of consulting firm J.C. Williams Group Ltd. “If you’re a specialty retailer you have to reinforce your authority in a narrow segment of retail. Do what you do best, and do it better than anyone.”
Like DVD Empire, several other online retailers say they can compete with mass merchants in their niches. And some see new opportunities from the online marketplaces that Walmart.com and Sears.com announced in the fall.
Ashford.com, which sells watches that often cost thousands of dollars, competes by owning its inventory and delivering it quickly, says Eli Katz, president of parent company United Retail Group. A mass merchandiser like Walmart.com might not want to hold that much specialized inventory, Katz says, especially since it has to be protected and maintained.
Buy.com, an online-only retailer of electronics and other general merchandise, competes by producing in-house thousands of product videos that are posted on the site, says president and CEO Neel Grover. Buy.com also offers a broad selection, with 5.5 million SKUs, many from outside merchants that sell through Buy.com’s own marketplace.
Could Walmart.com duplicate that selection? Eventually, Grover says, but it takes hiring buyers, finding suppliers and developing relationships that others already have.
Brad Wolansky, CEO of online retailer The Golf Warehouse, which sells on Amazon, says he is excited about the potential to work with Walmart.com. “Wal-Mart’s marketplace is an opportunity, and we’re pursuing it,” Wolansky says.
That’s also the view of Eric Heller, director of Internet marketing programs for specialty footwear retailer FootSmart. Heller, who is delighted with his Amazon sales, says, “Wal-Mart has customers that Amazon doesn’t, so it’s a potential growth story for us.”
Retailers may well be able to reach a new audience through Walmart.com, given the demographic differences between Wal-Mart and Amazon shoppers, according to investment bank Goldman Sachs. The median household income of a Wal-Mart shopper is $35,000 versus $60,000 for Amazon customers, and Google searches suggest Wal-Mart shoppers are more rural and Southern, while Amazon shoppers more often live in East and West Coast cities and suburbs, Goldman Sachs says.
But, in return for access to those consumers, Walmart.com demands good customer service, says Peter Cobb, senior vice president of eBags.com, one of the first three outside retailers selling on Walmart.com. Items must ship within 48 hours, and eBags, which has suppliers drop-ship its handbags and luggage, had to make sure its vendors could meet that requirement, Cobb says.
Retailers can also expect to be rated by Walmart.com shoppers. Next to each item sold by a marketplace retailer on Walmart.com there is a “Retailer info” link that displays Walmart.com’s one-to-five-star ratings of the merchant.
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