Wal-Mart What Is the Impact

Wal-Mart

What is the impact of Wal-Mart.com on customer-borne transaction costs?

The introduction of WalMart.com had an immediate impact on the customer-borne transaction costs by drastically lowering them, while also increasing selection. WalMart concentrated on bringing the majority of their catalog online first, supported by wholesalers and their distribution channel partners, then launching the site. This was an insightful decision as it gave the company the opportunity to manage orders more efficiently and fulfill demand.

The reduction in customer-borne transaction costs can be attributable not only to the lower costs of not having to come into the store, but the greater selection and time savings for customers as they shop. There is also the reduction in customer-borne costs of returns if they are needed, as WalMart structured their e-commerce initiative to support returns to any store. When an e-commerce initiative is structured to support the full range of purchasing options and supports returns, customer loyalty will result, in addition to lower transaction costs over time (Siau, 2003).

WalMart also concentrated on ensuring a high level of customer loyalty by also being one of the first online retailers to give customers the option of having the items or orders shipped, or having them picked up at their local store (Clarke, 2001). This provided WalMart with a steady stream of online shoppers they may have missed getting into their stores if they had not chosen to pursue this challenging logistics-based strategy. WalMart focused on making sure the online experience supported and strengthened their brand and as a result, they have been successful in transitioning customers to their website to make purchases.

Do you think that Wal-Mart.com is likely to create additional value?

WalMart.com creates immediate value by being another selling and service channel WalMart can serve their customers through. It also provides the foundation for a more effective multichannel marketing and lead generations strategy as well. The use of e-commerce sites to augment and accelerate the purchasing process is proven in Business-to-Consumer (B2C) industries where the results are highly quantifiable and measurable (Siau, 2003). WalMart has the ability now to measure the impact and performance of each of their e-commerce strategies with great precision and accuracy. Now WalMart will be able to see just how effective their promotional and pricing programs are.

WalMart is known for having an exceptionally strong grasp of pricing and product-based consumer behavior based on their promotional programs (Clarke, 2001). For example, WalMart has the latest pricing and sales data uploaded from their stores globally to their headquarters in Bentonville, Arkansas nightly for analysis and presentation by morning. WalMart knows the impact of a price reduction on their order volumes. The e-commerce site WalMart.com will further strengthen the analytical strength the company has. It will also give the company a greater degree of visibility into demand for specific types of products and provide analysis in near real-time how their Christmas toy sales perform. In short, the company will know more about their customers than ever before and also concentrate its efforts on the most productive and profitable areas. For the customer, the selection online and the ease of ordering will also be a major advantage and keep them loyal relative to competitors (Clarke, 2001).

Should Wal-Mart have pursued e-commerce more aggressively sooner?

WalMart could have potentially entered the e-commerce market earlier, yet that would have forced the company to launch without having the necessary fulfillment and logistics systems in place to support this strategy. That would have ended up costing the company customers and their reputation over time as well. It is better that they waited to have catalog online, their logistics and shipping functions defined, and also designed and launched their in-store pick-up program as well. The defining and executing of logistics strategies is critical for the success of any e-commerce enterprise (Siau, 2003). WalMart chose the best possible strategy by concentrating on making sure all the internal subsystems were working well before launching the website.

In conjunction with this focus on backoffice logistics and integration, the company was wise to continually refine their website experience as well. The more effective a website is in making and keeping commitments to customers, the greater the potential to earn customer loyalty over the long-term (Clarke, 2001). WalMart chose the right strategy for their e-commerce initiative and wisely got all of these factors under control before getting their site off the ground. Rushing the launch of the site would have potentially meant sacrificing many of the differentiators the company has, including in-store pick-up to drive traffic back into their stores, and the use of comparison-shopping of items not in their stores as well (Siau, 2003). If they had rushed to get their website up, they would have missed out on differentiating their website and making the experience a positive one, leading to greater customer loyalty in the process.

What do you think the potential impact of Wal-Mart.com will be on the company's efforts to expand internationally?