Why Wal-Mart Is Worried About Amazon?

Five years ago, the world’s largest retail chain didn’t have to worry much about the world’s largest online mall. Only about a quarter of Wal-Mart Stores (WMT) customers shopped at Amazon.com (AMZN), according to data from researcher Kantar Retail. Today, however, half of Wal-Mart customers say they’ve shopped at both merchants. That’s leaving the mega-retailer—which long ago bested local brick-and-mortar merchandise stores and supermarkets across America—with a massive online competitor that is too tough to ignore.

Threatening Wal-Mart’s dominance are two trends: The discounter’s traditional customers—bargain hunters making less than $50,000 a year—are getting more tech-savvy, and more-affluent shoppers who began frequenting Wal-Mart during the recession are returning to Amazon as their finances improve. Amazon has moved into merchandise categories that Wal-Mart traditionally has sold, from diapers to vacuum cleaner bags. In its last fiscal year, Amazon posted 41 percent revenue growth, to $48.1 billion, vs. 8 percent at Wal-Mart. The chain’s 2011 online sales amounted to less than 2 percent of its $264 billion in U.S. revenue, says Kantar. “Amazon is always in our sights,” says Jeremy King, chief technology officer at the retailer’s @ WalmartLabs skunkworks in Silicon Valley. “My biggest issue is playing a catch-up game.”

In the last year Wal-Mart has increased its investment in its online business. The company has spent more than $300 million acquiring five tech firms since May and hired more than 300 engineers and code writers in the U.S. and India. Wal-Mart is also launching a program to allow the 20 percent of its customers without credit cards or bank accounts to make online purchases.

Wal-Mart’s acquisitions include Kosmix, a social-media firm, and iPhone app creator Small Society. The company hopes the newcomers can find a way to stop shoppers from engaging in scan and scram. That’s when would-be customers use their smartphones in stores to scan an item’s bar code and then buy it online from a rival merchant. The chain’s tech team also is working on a concept called Endless Aisle, which would let shoppers immediately order from Walmart.com via smartphone if an item is out of stock. “You can’t ask people to leave their phones at the door. So you have to give them value and an experience,” says Venky Harinarayan, @WalmartLabs’ senior vice president of global e- commerce. The former Amazon executive joined from Kosmix.

Wal-Mart is trying to improve links between its store inventory, website, and mobile phone apps so that more customers can order online and pick up their purchases at stores, which half of Web customers do already. Wal-Mart is trying Web-based shopping tactics, like its Pay With Cash program for Wal-Mart customers who don’t have credit cards. The new program allows them to reserve products online and pay cash at their nearest store. To cater to its affluent customers, Wal-Mart is selling more expensive items—for example, high-end televisions from Sony (SNE) and Samsung—only online.

Harinarayan’s team is also trying to tackle a new problem for Wal-Mart. Last year the chain was the No. 1 destination for holiday shoppers, with 53 percent of U.S. customers visiting its stores. That was down from 59 percent the year before. To lure gift shoppers, the techies have developed a Shopycat feature that scans the social media preferences of a consumer’s Facebook friends and suggests gift ideas sold on Walmart.com. About 150,000 users have installed the app.

To roll out more such innovations, Wal-Mart must improve its in-house e-commerce technology, so King will hire 87 engineers and coders to bolster the links between the stores and the website. “We’re starting from scratch to build a foundation,” says the EBay (EBAY) veteran. “Ideally, we’d have this platform built a couple of years ago.”

 

The bottom line: Wal-Mart, which gets less than 2 percent of its U.S. sales online, aims to bolster its technical capabilities to compete with Amazon.

 

Look customers in the eyes to lock them in the aisles.

Shopkeepers adopt the hard sell with some tailored software, writes Mark Russell.

IN THE film Minority Report set in 2054, a brewer’s advertising billboard identifies Tom Cruise’s character, John Anderton, through a retinal scanner. As he walks past, the billboard calls out: ”John Anderton! You could use a Guinness right about now.”

Far-fetched? Not according to retailers who believe this type of targeted advertising may well be the future of shopping.

New York company Immersive Labs is already using built-in cameras and facial recognition software in its outdoor billboards to determine the gender and age of passers-by so it can customise the advertisement on display to suit them and prompt sales.

So if a man strolls by on a cold morning, the display might change from an ad for women’s clothing to an advertisement suggesting a cup of coffee at a nearby cafe.

As Australian online shopping – expected to be worth $21.3 billion this financial year and $30.8 billion by 2015-16 – continues to threaten bricks-and-mortar businesses, retailers are using the latest technology, combined with social media, including more shopping apps, to lure customers back into their stores.

German shoemaker adidas is planning to install touch-sensitive display walls in stores from next year. The virtual footwear wall will allow customers to view the company’s entire range of 4000 pairs of shoes. If a customer likes a particular shoe the store will order it in.

Two cameras above the screen will watch shoppers’ reactions to determine which shoes are most popular. And like other companies, adidas is also gathering feedback by encouraging customers to use Facebook and Twitter to review its products.

Brisbane company Yeahpoint believes its MiMirror creation is the missing link between instore shopping and social media that will revolutionise fashion retail.

MiMirror is a touch-screen display with a camera that acts as a mirror and takes up to six photographs of customers in outfits they are considering buying. The shoppers then email the images to friends or post them on Facebook to get a second opinion.

No retailers have installed the technology yet, but the company is confident major stores will buy the device in coming months.

”The factors driving retailers’ decisions for the future are basically that the cost of business continues to increase and competitiveness in the retail environment is being challenged by the online market,” Yeahpoint’s John Anderson says.

”On the flip side, you have the time-poor consumer who wants to have a much more friendly, fun shopping experience.”

Sean Sands, of Monash University’s Australian Centre for Retail Studies, agrees, saying many consumers are bored with traditional retail and the only way to lure them back into stores is to offer the latest technology linked to social media.

A recent report released by the centre found that online shopping was creating tougher in-store customers because they were ”better informed due to the power of the internet”.

Half the population now research their purchases online before setting foot in a store.

Many are also armed with a wide range of shopping apps that can be downloaded on to iPhones, iPod Touches, iPads and other tablets and smartphones, that allow them to hunt for the best deals.

The RedLaser app, for example, allows instore shoppers to scan the barcode of an item to get the price and then checks online to see if it’s cheaper elsewhere.

Supermarket giant Coles’ ShopMate app, which notes specials and lets you cross off your shopping list as you go, has been downloaded 400,000 times.

Rival Woolworths does not have a shopping app but has one to locate missing trolleys.

Woolies’ app-lessness is not likely to last, however, as retailers respond to consumer demand.

Russell Zimmerman, of the Australian Retailers Association, says ”every retailer has to be in the online space in the foreseeable future” or they won’t survive.

According to PayPal, 8 million Australians buy goods using the internet, and one in 10 buy them with their mobile phones.

Google Australia’s head of retail, Ross McDonald, says this increasing use of mobile phones to search for stores and products has become a noticeable trend in the past six months.

Previously, 95 per cent of online traffic for shopping searches was from computers but 16-18 per cent of online inquiries were now from mobile phones. ”What we advise retailers is that it’s not so much about the app but making sure you are visible on a mobile device when someone searches for you,” he says.

Jo Lynch from Myer – which has an iPhone app that lets you peruse and buy goods with a tap of your finger – says the company expects its online business to generate sales of $5 million for 2010-11 and be worth up to six times that in the next few years.

David Jones’ Brett Riddington says the future of shopping is all about multi-channel retailing. ”Many customers will still want to go in-store to physically see the goods after checking them out online, but we need to make that a more entertaining and engaging experience,” he says.

Web strategies vary for co-ops

The co-op model has always been focused on driving customers into dealer members’ stores. But as more consumers migrate their purchases online, the three largest hardware co-ops have taken different approaches to harnessing the power of the Web.

Do it Best Corp. launched its Web site and e-commerce department in 1999. Back then, it was simply a tool to help customers find their local store. But it didn’t take long for the co-op to realize there was a major selling advantage online.

In order to leverage all 4,100 Do it Best locations, the company made ordering online easy. Customers could log on to doitbest.com and have access to about 65,000 SKUs — the full line of merchandise from Do it Best — and the item would ship from one of eight distribution centers around the country. By entering the shipping information, the customer’s local Do it Best store would get the credit from the sale. In order to drive sales in the stores themselves, customers can choose to have the item shipped to the store, waiving shipping costs and get ting customers in the stores.

“We remind customers through out their online experience that they can avoid shipping charges by simply picking up the item at their local store through our ship-to store program. This drives customers into our stores, and many times converts that online shopper into an in-store customer as well,” said Joe Caldwell, e-commerce manager.

But members are fully capable of developing their own Web sites. Gillroy’s Got it Complete Hardware has found running its own site, gillroys.com, has helped drive the store name, while benefiting from the Do it Best e-commerce model. While the Flint, Mich.-based hardware chain hosts its own site, it still links to doitbest.com to complete purchases, eliminating the need to run its own warehouse.

“Even though we don’t handle it, we don’t stock it and we don’t have to inventory it, we get a significant amount of the profit margin from it,” said Kurt Zimmerman, of Gillroy’s e-commerce department. “You would need to have a massive warehouse to stock that many SKUs,” he added.

Zimmerman said that Do it Best provides all of the price updates, photos and product descriptions to them — all they need to do is update the server.

“It’s basically like having another store, but Do it Best makes it very easy,” he said.

Currently, 60% of Do it Best members participate in the e-commerce program to some degree, according to Tim Miller, VP marketing. “The key to our program is that flexibility, to let our members take an active or passive approach to e-commerce,” he said.

Ace Hardware’s e-commerce approach has some similarities to Do it Best. It too drives sales through the company Web site, acehardware.com. It also offers customers the same ship-to-store option to avoid paying shipping fees and gives the sale to the customer’s local Ace member store.

At Ace, the e-commerce system is intentionally kept as simple as possible, according to Mark Lowe, of the co-op’s digital interactive marketing team. According to Lowe, driving customers to one online site, and from there directing them to their local store has proven to be very successful. Lowe points to the growing trend of customers selecting the ship-to-store option.

“Overwhelmingly they choose to ship to store,” he said. From there, Ace has been able to track that 33% of ship-to-store customers make additional purchases once they are in the store.

According to Lowe, that drives to the heart of Ace’s e-commerce strategy: to capture the online sales that are out there while driving customers to the stores when ever possible.

In 2007, the company launched the My Local Ace feature on its Web site. “We took the store locator to the next level,” Lowe said. The feature not only gives customers a look at what local Ace dealers are near them, it provides contact information, store hours, current in-store promotions, a list of departments and a list of services the store provides. “We’re really trying to bring on a local feel,” he said.

True Value’s e-commerce model is currently in the works, said CEO Lyle Heidemann in a recent interview.

“We are seriously looking at an e-commerce site in 2010. This is something we believe we need to do to be competitive,” he told HCN in an interview at the co-op’s fall dealer conference in Salt Lake City.

Heidemann recognized that consumers are out there shopping on the Web, comparing prices, and ultimately “you have to be there,” he said.

At least one dealer member has been there for some time. Fusek’s Hardware, of Indianapolis, has its own Web site, fusekstruevalue.com, which it uses to drive customers into its store. But recently, it has expanded its online presence by launching an exclusively online store, Ron’s Home and Hardware (ronshomeandhardware.com).

For Steve Fusek, running an online business apart from the sister store was a necessity. For him, trying to run the brick and mortar while meeting online demands would have been a logistical nightmare. By separating the two businesses, he can run them exclusively — even warehousing his online stock at a different location — and still meet his customers’ demands.

And while Fusek was left to build his online business on his own, he said he does like the freedom that True Value grants its members to explore new ways of building their businesses.

“They aren’t necessarily helping me do it, but they’re not standing in my way either. Their attitude has always been ‘If you have a better way to do it, more power to you, do your thing,’” he said.

But as True Value looks to create Internet sales, it could easily find itself adopting Fusek’s online model.

“We’re blazing a bunch of new trails,” he said.

United Supermarkets to Launch Full-Scale Online Channel

United Supermarkets plans to enhance its online presence with a suite of online tools designed to help retain and acquire new customers as well as increase profits.

This custom online toolset, developed by Colchester, Vt.-based MyWebGrocer, will include full online grocery shopping, Web hosting, recipes, interactive circulars, and e-mail marketing applications. United will also join MyWebGrocer’s national Advertising Network to expand its capabilities for creating advertisements that display grocery specials, new products and sale items.

“Our consumers are demanding a more rich online shopping experience, and MyWebGrocer is uniquely qualified to help us stay ahead of consumer demands,” said Randy Crimmins, VP of marketing for United. “Their suite of tools and services is the most robust in the industry and will allow us to provide a fully integrated experience for our consumers across our entire Web site.”

Lubbock, Texas-based United operates 50 stores under three formats: United Supermarkets, Market Street and Amigos United.

Sears Brings Personalized and Convenient Shopping to Life With ShopYourWay

Sears Holdings Corporation today announced the unification of its industry-leading, multi-channel services under, ShopYourWay, which transforms the shopping experience and gives customers just that – the ability to “shop their way.”

Both Sears and Kmart customers can now conveniently experience these innovative and best-in-class, multi-channel purchase opportunities in stores and online. As more and more new multi-channel capabilities are made available, the ShopYourWay banner will help identify the many choices for Sears and Kmart customers.

ShopYourWay provides the best of what Sears and Kmart offer – great prices everyday and one of the largest assortment of brands, products and services of any store online or offline through Sears.com and Kmart.com, Sears2go, Web to Store, Store to Web, 1-800-4-MY-HOME and in-store visits. Its expanded selection of jewelry, apparel, electronics, tool, shoes and power lawn & garden equipment are now always available on Sears.com or Kmart.com.

“ShopYourWay revolves around the lives of our customers,” said Richard Gerstein, Sears Holdings Corporation’s senior vice president, marketing. “By letting their schedules determine the way they shop, our customers can take advantage of making purchases in-store, online, over the phone and with mobile capabilities.

ShopYourWay empowers our customers to manage their lives by providing them with unique services, expanded selections and the best prices.”

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Asia: Online Shopping takes off as Internet access improves

SINGAPORE: From dresses to handbags, diamonds to music downloads, consumers in Asia are taking to Internet shopping as never before, making the region one of the world’s fastest-growing e-commerce markets.

“I like to shop for clothes online because no sales girls will pester me,” said Cecelia Wang, a 23-year-old university student in Taipei who said she spent about 1,500 Taiwan dollars, about $43, each month on Internet purchases. “For online shopping, all I need to do is sit in my room and shop, which is great.”

Internet retailing is increasingly making its presence felt in Asia because telecommunications infrastructure has improved and payment, a major obstacle to online shopping, is increasingly secure, analysts say.

Internet penetration rates, the percentage of the population that has Internet access, is about 17 percent in Asia versus 73 percent in North America and almost 50 percent in Europe, according to www.internetworldstats.com.

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Upcoming seminar on Greentailing and other new global trends

6one5 Retail Consulting Group’s Greentailing & Other Revolutions In Retailing Breakfast Summit, to be held on Wednesday February 11 in Rushcutter’s Bay, Sydney, addresses many issues relevant to retailers, including the ever prevalent green consciousness.

Presented by Will Ander, senior partner at McMillan Doolittle and Robert Kinkade, partner at 6one5, with a welcome address by Inside Retailing’s Melbourne editor Bruce Atkinson, the summit coincides with the release of Ander and Neil Stern’s book, Greentailing: and Other Revolutions in Retail.

As well as greentailing, Ander address five other major revolutions happening in retail: Continue reading

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