Walmart.com's impact on customer transaction costs and competitive advantage

Wal-Mart.vom

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

The impact has been to significantly reduce them, as the e-commerce site is integrated directly into the company's logistics systems, as is implied in the article. Wal-Mart took the time to figure out how to break down large shipments into individual orders before going online; this was a critical success factor for them and a primary reason their cost per transaction online is significantly below that of a store-based transaction. The time taken to integrate ordering, supply chain and pricing systems with the website was one of Wal-Marts' best decision in structuring Wal-Mart.com.

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

Yes, in a variety of areas Wal-Mart.com will create additional value. First, there is the service strategy that Wal-Mart.com is relying on, where customers who buy a product online can return it to any of their over 2,000 stories. This is a major competitive advantage over other online-only retailers. Second, Wal-Mart.com will also support in-store sales of products by making it possible to order online and then pick up the item at the store. This will drive further a multi-channel selling strategy for Wal-Mart.

Is it likely that Wal-Mart will capture any value created by Wal-Mart.com?

Yes, both from a transaction-by-transaction level where the product ordered online can be either picked up from the store or returned there for a refund, and also through the use of cross-selling and up-selling online through Wal-Mart.com to drive customers into the store for the most competitive product areas, which during the holiday season, is toys.

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

No, it was wise to wait and see what lessons were being learned both from their store-based and online-based competitors. Most importantly however, Wal-mart took the time to understand why integration of their systems and the ability to break down larger shipments into smaller ones was critical for their operations.