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Wal-Mart Tiptoes Online

The retail industry awaited the re-launch of with bated breath. But the website of mass merchandiser Wal-Mart Stores Inc. is receiving a tepid response from some analysts.

"Wal-Mart is set up to succeed, but in no way is the site a slam dunk," says Melissa Shore, an analyst with New York-based Jupiter Communications, a market research firm.

Launched in January, is stocked with 600,000 items, as compared to the 100,000 items available at brick-and-mortar Wal-Mart stores. A color image of "Jill," the greeter that Wal-Mart shoppers are accustomed to seeing in ads, pops up front and center on screen, welcoming visitors to the site. divides merchandise into 25 categories. Users can find items by clicking on categories such as "health and beauty," or just typing keywords into search prompts. Shoppers who are more accustomed to cruising through physical stores can search for merchandise aisle-by-aisle by clicking on a store map.

Other features include a gift- and toy-finding function and photo development and travel reservation sections. Wal-Mart plans to launch an online pharmacy later this year.

"We've tried to make the site easy for both high-tech users and people who aren't accustomed to being online," explains Melissa Berryhill, a spokeswoman for the Bentonville, Ark.-based chain.

New opportunities Visitors can use "My Wal-Mart" to personalize the site and make checking out faster. The personalization option is an important tool for Wal-Mart: The company can profile its online shoppers at least as thoroughly as those from brick-and-mortar stores.

Personalization enables Wal-Mart to target merchandise categories or specific products to Internet customers based on their preferences and shopping habits. If, for example, a My Wal-Mart customer is a regular visitor to the pet department and buys cat food and toys, that person is likely to see promos for additional cat-related items when he next logs on.

The feature lets Wal-Mart do cross-marketing between online and physical ventures by sending customers e-mail reminders about events and sales at stores closest to them.

"We view the stores and the website as a complement to one another," says Berryhill. "Our business will continue to evolve, and we will adapt to the changes, but our focus is still on the customer and propelling our business forward."

Another tie-in between the physical stores and the Internet is customers' ability to return merchandise bought online to any of the brick-and-mortar stores. In addition, Wal-Mart is testing between 40 and 50 in-store kiosks to help bring Wal-Mart customers - who aren't perceived as typical web users - online.

The Internet-linked kiosks allow shoppers to find and order products that aren't available in stores. Wal-Mart associates are on hand to offer basics on web surfing, walk customers through transactions, and help them become accustomed to buying online. "We're letting customers shop with us when, where, and how they want to," says Berryhill, "be it online or at our stores."

More of a tiptoe, less of a strut Some observers in the retail industry are scratching their heads at the quiet way in which made its debut. Considering the power of the Wal-Mart brand, retail analysts expected a much more spectacular entrance. Although the site earned plenty of ink in the business press, they note, efforts to sell to consumers have seemed restrained.

Does your Aunt Ada in Bessemer, Mich., who rarely shops at Wal-Mart stores, know that she can peruse virtual shopping aisles at and have laundry soap, sweatshirts and makeup shipped to her doorstep? Is the possibility of visiting the site at 2 a.m. to buy CDs and a DVD player on the mind of your Gen X nephew in San Francisco?

"I haven't seen a big marketing buzz come out of Wal-Mart about its online presence," observes Shore of Jupiter Communications. "The company can't expect consumers to just find the site. It has to tell people about the site and give them a compelling reason to go there."

Wal-Mart points out that it is leveraging the strength of its physical presence with in-store marketing of, as well as including information about the site in TV, print and radio ads. Others speculate that, for the moment, the company may be embracing the French maxim, "If you have a good wine, you don't need to market it."

Ed Lubieniecki, a partner with the e-commerce practice of E&Y Kenneth Leventhal Real Estate Group, Los Angeles, believes that Wal-Mart is in an enviable spot.

"Wal-Mart is in a position of luxury where it doesn't have to spend millions of dollars to let people know it has a site. Unlike a startup or a pure e-commerce player, Wal-Mart already is the world's biggest retailer," Lubieniecki notes. "These are the advantages the big branded players have. They can spend their next $100 million on the site, rather than use that money for national branding. They don't have to be in any hurry.

"I'm not saying this is Wal-Mart's strategy, but the company is in this for the long haul," Lubieniecki continues. "If it takes a year for people to get to and figure out that it's the best, then that might be fine with Wal-Mart."

And retail insiders also see plenty of potential in the site. In early March, for example, the chief executive of Gap Inc.'s Banana Republic division, Jeanne Jackson, resigned to become's CEO.

Jackson, who in 1998 and '99 was named one of the "50 Most Powerful Women" in U.S. business by Fortune magazine, became CEO of Banana Republic in 1996. She has developed successful brands and merchandise programs for several leading retailers, including Saks Fifth Avenue, Victoria's Secret, the Walt Disney Co., Federated Department Stores and Gap Inc. Jackson also was responsible for leading online programs for Banana Republic, Gap and Old Navy, as well as Banana Republic Catalog.

" represents the single most exciting opportunity on the Internet today," Jackson said when the move was announced.

Coffee pots and light bulbs Its future may be bright, but the e-commerce venture needs work today, according to Shore and other analysts. " would've been a great site one or two years ago," Shore says. "But given the competitive marketplace online today, it falls short in terms of layout and functionality."

At press time, when a user typed in the keyword "coffee pots" at the site's main search prompt, the sole match that appeared was a line of text that said, "Lime-A-Way Everyday." Clicking on that link produced an error message, not information about coffee pots.

A slightly different spelling - "coffeepot" - brought up a book titled Baseball's Zaniest Moments as the first match. And the top match in a search for "light bulbs" also yielded books - the first being Light Bulbs for Leaders, the second a children's book, A Snake Mistake, which includes a descriptive blurb that starts, "Farmer Henry puts light bulbs under his chickens so they will make more eggs."

"The site is not a market-leading presence. It's inadequate," says Seema Williams, senior analyst with Cambridge, Mass.-based Forrester Research. "Its search capabilities are awful, the menu is OK, but not quite right. Wal-Mart is doing product presentations, but not adding anything to what manufacturers already provide, so you can't really tell the difference between two pairs of scissors."

Others point out that Wal-Mart has a lot on its side. Unlike its purely online kin, the company has a brand identity, a solid customer base, and a proven ability to stock and move massive amounts of merchandise. They see as a flawed but significant beginning.

"I look at this as release 1.0," Lubieniecki says. "Every site that we now think is great has typically been through many generations of releases, whether they're significant upgrades or just ongoing fine-tuning. I'd expect that with Wal-Mart's history of excellence, the site will get better and better over time."

Teacher or student? The launch won so much attention in part because of expectations the site would break new ground, thereby helping retailers develop new ways to deal with the Internet. But because Wal-Mart's physical stores have captured such tremendous market share, and because the company's shoppers aren't as likely to buy goods online anyway, analysts say Wal-Mart actually might have felt less urgency about developing a click-and-mortar strategy.

Might it be that Wal-Mart could learn lessons from the shopping center industry, which has thought long and hard about the web?

Columbia, Md.-based The Rouse Co., for example, is promoting its centers through a site that allows web surfers to "pre-shop" Rouse properties and zero in on stores that carry items on their shopping lists. The site features a gift-finding service that makes informed suggestions, offers photos and descriptions of appropriate items, and indicates where merchandise can be found.

In addition, Rouse has notched up the level of customer conveniences at its malls by offering free gift wrapping and other services. It will soon add features such as coat checks, package storage and on-site fax and e-mail. Similarly, Simon Property Group, General Growth Properties and other industry leaders have all spent millions on comprehensive Internet strategies.

Wal-Mart has found that up to 40% of the communities in which its brick-and-mortar stores are located have either no Internet access or expensive access through a long-distance carrier.

However, the Bentonville, Ark.-based mass market retailer recently embarked on a joint venture with Dulles, Va.-based AOL that could bring more Wal-Mart customers to the Internet.

The two companies are collaborating on a strategic alliance that creates a new co-branded Internet Service Provider (ISP). The deal also provides cross-marketing opportunities between Wal-Mart and AOL. For example, can be easily accessed from all of AOL's popular "Shop@" electronic retail brands.

The Wal-Mart/AOL ISP is a customized version of AOL's CompuServe web portal, priced for lower-income consumers. It also allows parents to determine which sites their children visit. Wal-Mart customers are given software that quickly creates an online account offering local access.

In addition to the in-store distribution of the co-branded ISP, Wal-Mart also distributes AOL 5.0 software that includes a link to As part of the agreement, Wal-Mart now promotes AOL's flagship interactive service through in-store promotions and print, radio and TV ads. AOL now has more than 19 million members. CompuServe has 2.2 million.

Wal-Mart says the move is especially significant for consumers who live in smaller communities that are now on the losing end of the so-called "digital divide." Wal-Mart and AOL have agreed to work together to increase the availability of local Internet access in those areas, says Wal-Mart spokeswoman Melissa Berryhill.

"We're hoping to bring non-traditional users, the Internet 'have-nots,' online," she notes, adding that the agreement is consistent with Wal-Mart's history of bringing new opportunities to small- and medium-sized communities.

The two companies also are exploring the most effective way to market a full range of next-generation interactive devices and services - such as AOL TV - designed to appeal to Wal-Mart customers.

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