Evaluation of the business model for Wal-Mart.com. Is it a successful model?
Wall-Mart is using the click and mortar business model, it is a multi-channel business model that leverages the best of both online and offline operations.
One of the advantages of this model is that it offers products and services through multiple channels: through its brick and mortar stores and online store. In addition, most of the products offered by Walmart.com have successful e-tailing characteristics. They are relatively inexpensive items, frequently purchased items, commodities with standard specifications and well know packaged items.
The site offers superior service in the form of extensive information:
Shipping costs and times information
Physical store locator
Product information, comparison and recommendation
Special promotions in physical stores
New product information in physical stores
Wal-Mart events information
Idea center on how to best use purchased products: health, recipes, or personal care and style.
This model also provides benefits of flexibility and convenience: registry services for having a baby or weddings, creating wish lists so others know what you like, and gift cards. It also offers ability to pickup your online orders in-store. Personalized and customized services such as digital photo center.
Most of these benefits would not be feasible with other business models. Wall-Mart's distribution channel is used very effectively to provide such benefits. Established relationships with manufacturers make product management easier and eliminate problems with back end operations such as managing inventory. This helps Walmart.com with managing inventory against product demand and order fulfillment.
Wallmart.com operates as a subsidiary of Wal-Mart which allows Wallmart.com to concentrate on the e-commerce operations such as front-end design, customer support environment and other virtual/e-commerce best practices. Meanwhile it leverages its physical operation's strengths; thus, making click and mortar business model very successful.
In addition, online sales through Wallmart.com already accounted for about 10% of Wal-Mart's (U.S) sales in 2002-2003. This is a great indication that part of this strategy is heading in the right direction.
Strategies for compete in the online marketplace.
First, Walmart.com is not using the first mover advantage. Rather is appears that it tries to be innovative in how it competes online: utilizing best mover advantage. Walmart.com has learned from Kmart.com's mistake and did not offer its customers free access to the internet, in order to attract customers to its website. Instead, Walmart.com partnered with AOL to offer low cost internet access to specific customer group. Then in 2002 Walmart.com started offering order status and tracking, help desk and other proven online benefits. Many proven techniques that are deployed on its web site have been proven by other companies such as Amazon.com or E-Bay. I agree with this approach. Wal-Mart's customer base represents households with relatively low incomes and this group's ability to move to an online environment will take time as internet becomes more affordable and their purchasing behavior changes. The volume of e-business will grow for this group at somewhat predictable pace. Kmart.com's inability to entice profitable volume of online sales indicates that the market for this demographic may not be large enough.
Second, Walmart.com wishes to attract customers who don't live close to a physical store by offering them internet access at low cost so they could have access to Wal-Mart's products. The intent was to lure new market segments and thus prevent the cannibalization of physical stores. There are two reservations that I have about this strategy: First, it is easier to keep current customers then to attract new ones. This is a value-added...
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