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... in states in the 47 states where the dot-com doesn't operate. In the spring of 2000, Jeanne Jackson joined Wal-Mart. com as the CEO.
Jackson came from the Gap, where she transformed Banana Republic in to a chic, urbane shopping destination, increasing sales from $ 750 million to $ 1. 5 billion in four years. Jackson was chosen for the position because of her strong background in traditional retailing and her leadership of the Gap's Direct division, which included managing its Internet sites. Because Wal-Mart did not have direct sales expertise, launching a Web store required creating a new direct-marketing infrastructure and developing a new set of management skills. Jackson provided this link.
Since arriving at Wal-Mart. com, Jackson has slimmed down product offerings and re-vamped the site, which re-launched in early November of 2000, just in time for the holiday season. Under Jackson's leadership, Wal-Mart. com has purchased the assets of several smaller e-tailers and formed partnerships with Time Warner and RealNetworks to offer proprietary music events via the web.
Jackson's stated strategy for the site is to start with a reliable, easy-to-use web site which both get back to Wal-Mart's traditional strengths. In addition to stripping away the bells and whistles from the site, Jackson also stripped away products that made no sense on the web (i. e. $ 0. 25 plastic cups) and expanded categories that complemented store offerings, such as patio furniture. Ultimately, Jackson would like to have shipping and customer-service in-house, and to fully-integrate the stores and the web. This last item will be essential in achieving the right mix of bricks-and-clicks to fully service the Wal-Mart customer. Currently Wal-Mart.
com is working on the ability to offer online listings of real-time inventories in individual stores. This would allow customers to decide whether to head to the store, or to buy the item on-line. This type of seamless integration could determine the success of Wal-Mart's on-line presence by leveraging the strengths of physical and on-line stores to offer a full-service capability to customers. As discussed earlier, the Wal-Mart customer may not have been the ideal Internet shopper three years prior. However, as the digital divide narrows, Wal-Mart may find many customer service benefits to the web, which would bolster their already strong customer service reputation. In analysis of Wal-Mart's decision to take Internet operations out-of-house, we refer to the article entitled "Get the Right Mix of Bricks & Clicks. " Components of the seamless strategy and joint venture strategy make sense for Wal-Mart.
In support of their early decision to integrate operations, Wal-Mart's brand and customers lend well to an integrated platform. Wal-Mart's brand needed no introduction s, and they could advertise the web site throughout their numerous stores nationwide. Additionally, the brand is known for everyday low-prices, which fits well with Internet shoppers' priorities. Opposition to the seamless strategy lies in Wal-Mart's lack of direct sales experience and fulfillment capabilities.
Additionally, the importance of benefits derived from seamless customer service may have been mitigated for Wal-Mart at the time, as many felt the Wal-Mart customer profile was not web-savvy. Real Results Perhaps the transition difficulty in the early years rested in the area of Wal-Mart's technical prowess. As discussed previously, one of Wal-Mart's core competencies is its operational ability to streamline the supply chain through cross-docking inventory systems and efficient means of communication through technology. While Wal-Mart has achieved technology efficiency in its supply chain, shipping to a store is a much different game than shipping direct to a customer. In this case, the web presented much more than just a technological advancement. Perhaps the secret to the web relied more on the ability to use the channel to reach customers to develop an efficient relationship.
Wal-Mart had an expertise in operations, not in one-to-one customer relationships. Finally, the definition of "low price" is more tied to value on the Internet. Value includes the information available to an on-line shopper, convenience and ease of purchasing items, and actually obtaining those goods as a result. In reality, leading web sites like Amazon. com do not offer the lowest price.
Instead, they offer the best value. They make "the right product available at the right time in the right place. " Customers are willing to pay a small premium for that convenience. Additionally, low-priced goods on-line typically net out to be of equal or higher price once shipping is included. Wal-Mart may not be able to successfully offer the lowest on-line price as it incurs added costs through direct marketing and delivery to customers. Another asset has driven Wal-Mart's growth: a friendly shopping environment. It is important to assess whether this strategic advantage easily translates to an Internet environment.
While an easy-to-use site makes a shopping experience more pleasant, it doesn't necessarily equate to a smiling salesperson helping you shop. Wal-Mart also forgot to capitalize on one of its greatest strengths in the traditional, physical world. Wal-Mart's wide aisles with a multitude of shelf facings have enabled Wal-Mart to increase sales per store visit simply by suggesting products to shoppers. Wal-Mart has taken advantage of the tendency to impulse shop. Wal-Mart has yet to translate this ability into the virtual world. What's Next Although Wal-Mart appears on the right track with its partnership with Accel and the creation of Wal-Mart.
com, its responsibility to manage the technical transition has only begun. Wal-Mart and Wal-Mart. com must create a plan to both monitor internal operations and technological advances. For Wal-Mart, it appears that a separate company is the right option based on the aforementioned analysis, however, this may not always be true. Most analysts agree that the role of the Internet is in its nascent stages, and will continue to develop over the next few years.
With this in mind, Wal-Mart must monitor the progress of its company and determine if there is an advantage, whether from a financial, managerial or even marketing standpoint, that would favor integration. Similarly, with the rapid change in technology effecting customer relationships, Wal-Mart and Wal-Mart. com must institutionalize their monitoring of developments. Rather than jumping on the Internet bandwagon, Wal-Mart must learn from its mistakes in this case and keep an eye out for future disruptive technologies. As many cases show, a company's strength can quickly become a competency trap. In order to help prevent this, Wal-Mart and Wal-Mart.
com must create incentives for managers at both organizations to follow technological developments. Managers should focus on more than simple NPV and DCF analysis and factor in some benefit of being a part of the technology. The introduction of real options could potentially solve this problem. Although it may be difficult to implement at present, keeping it in mind in going through project decision analysis will benefit Wal-Mart. There are three unique ways for Wal-Mart to access disruptive industry changes: partnerships with third parties (like the Accel deal), the acquisition of companies with complementary technologies, or through internal development. Wal-Mart.
com can become a breeding ground for technological and managerial innovation. Since Wal-Mart is a well-established firm, it requires large scale projects with high ROI's. This characteristic may prevent adaptation and adoption. In contrast, Wal-Mart. com will be smaller in scope and potential projects, making it easier to experiment with new means of serving the customer. Regardless, a system of knowledge management must be created to allow the two companies to share innovations and great ideas.
Whether these systems are institutionalized (ex - group of Wal-Mart and Wal-Mart. com people who meet semi-regularly) or informal (ex - Wal-Mart encourages people to meet cross-company for events or discussions), the management of both sides must explicitly support the sharing of information. Clearly this integration is where the true efficiencies can be realized. As evidenced by the lack of profitability in th...
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