Evaluation Of The Business Model For Wal Mart.Com

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:

* Order tracking

* Purchase history

* 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 benefit to customer relationship management. Perhaps the online business unit would be better utilized by being used for loyalty building programs. Wal-Mart's fears of cannibalization are unsubstantiated as current online buying trends and patterns indicate that many customers still prefer to use physical stores. Higher end customers that shop at Futreshop.com still do majority of their shopping at the physical stores.

Regarding the target segment Walmart.com is trying to reach; recent research indicates that profitability is closely related to local strategy. (Harvard Business Review, September 2005) Local environments still have different tastes, business practices, cultural norms and other characteristics. Simply offering internet connection to those customers may not be enough to create consistent online sales form them. Local retailers may server these segments better and offer customized services due to their small customer base. Therefore, Walmart.com is facing two obstacles: local retailers and customer buying habits. Changing them may prove to be a difficult undertaking.

SWOT analysis approach

Strengths:

1. Walmart.com has an alliance with the master of retail process: Wal-Mart. Having the best process and infrastructure when it applies to supply chain is definitely a competitive advantage. Walmart.com can take advantage of back end operations and inventory management processes through its alliance with Wal-Mart.

2. Established knowledge about its customers their needs and demands. Walmart.com realizes that median household income of an online consumer is higher than that of its regular customer - those shopping at its physical stores. Its alliance with AOL helps target those customers that can't access physical Wal-Mart store on regular bases - undiscovered market niche.

3. Its reputation and physical presence creates trust and convenience when it comes to returns. Customers are assured that the business is strong and will not disappear overnight.

Weaknesses:

1. Company is an established leader in the physical world and as such is much more complacent in