Posted 3/19/2012 12:00 am
Updated 6 months ago
After several failed attempts to get its customers to buy products online, Wal-Mart Stores Inc. has changed its strategy.
During the past year, the Bentonville retailer has spent hundreds of millions of dollars buying experienced social media and e-commerce companies to run Wal-Mart’s technology initiatives.
- Last April, Wal-Mart bought the social and mobile media company Kosmix of Mountain View, Calif., for $300 million.
- In February, Wal-Mart increased its investment to 51 percent in the Chinese online retailer Yihaodian. “It’s an e-commerce business. … e-commerce is growing so quickly, and we don’t want to get behind the curve on that at all,” Charles Holley, Wal-Mart’s chief financial officer, said during the Bank of America Merrill Lynch Consumer & Retail Conference earlier this month.
- On March 9, Wal-Mart acquired Newput Corp. of Cupertino, Calif., for an undisclosed price. Newput’s Social Calendar offers an app on Facebook that allows users to receive birthday and holiday reminders by email and text messages. The company, which was formed in 2008, has 16 million users worldwide.
Social Calendar could play a role in Wal-Mart’s social media strategy that focuses on Facebook. In October, Wal-Mart launched 3,500 Facebook pages, one for each U.S. store, a move that has been praised by online retail analysts. (See Wal-Mart Wants You to 'Like' It.)
The acquisitions are “really about buying capabilities that we haven’t had before and operating successful e-commerce businesses,” Holley said during the conference, a transcript of which is posted on Wal-Mart’s corporate website.
Holley said that Wal-Mart’s acquisitions gave the retailer the “know-how and the people that know how to do these kind of things.”
He said Wal-Mart knew that its technology in the social media sector “has been lacking. … We haven’t been historically known for that or good for that, and we want to build an expertise in that area.”
He said that it was still too early to talk about specific plans for the social media and e-commerce products, though. But he said more information would be released in the next six to 12 months.
“It’s very early days for us,” Holley said, adding that the company didn’t yet have much information to share.
Online Sales Rising
Wal-Mart’s moves into e-commerce and social media come at a time when online retail sales are climbing. In 2010, online sales in the U.S. hit $177 billion, which accounted for 6 percent of total retail sales, according to Forrester Research Inc., a research firm in Cambridge, Mass. In 2011, online sales in the U.S. reached $202 billion. By 2016, Forrester forecasts, online sales will have grown to $327 billion and represent 9 percent of total retail sales.
Wal-Mart’s revenue for the fiscal year that ended Jan. 31 was $443.85 billion, up 5.9 percent from the previous year. But revenue in its U.S. division was up only 1.5 percent to $264.19 billion for the fiscal year that ended in January. Wal-Mart doesn’t break out online sales.
“We are very focused on not just being the price leader but making sure the customer understands that in every way possible,” Holley said in the March 7 meeting. “Not just with the real low prices but also how we use our media advertising and how we use social media and how we use the Internet.”
Wal-Mart even created a new unit in May, WalmartLabs of San Bruno, Calif., which will handle social media and e-commerce initiatives for the retailer. In November, it opened an office in India and planned to hire 100 developers.
“Today, we are on the cusp of a new era in e-commerce that is driven by social networks and delivered to consumers over mobile devices,” Anand Rajaraman, a senior vice president of Wal-Mart Global eCommerce, said in a Nov. 9 news release. “WalmartLabs India will be a strong and talent-dense base for us, and we are looking for developers who want to push the envelope to change the world of e-commerce.”
One of WalmartLab’s first shopping apps was Shopycat, which launched on Dec. 1. Shopycat gives Facebook users the ability to quickly find gifts for people based on their likes and interests on Facebook, according to a Dec. 1 Wal-Mart news release.
“A friend who might have shared interests in the movie ‘Super 8,’ yoga and parenting, will have Shopycat recommend an exclusive edition of the movie, a fashionable yoga mat tote bag and a book on scream-free parenting,” the news release said.
If people aren’t active on Facebook, Shopycat will recommend gift cards to Walmart.com, iTunes or Starbucks, the news release said.
Wal-Mart’s website, Walmart.com, is also offering deals, Duncan MacNaughton, chief merchandising officer for Wal-Mart U.S., said during a Credit Suisse consumer conference in December. A transcript of that event was posted on Wal-Mart’s website.
MacNaughton touted the benefits of a customer ordering something from Wal-Mart’s website and then having it shipped to one of its stores for free. For about 20,000 items, a customer could order and pick up the merchandise on the same day.
“We are working hard to build that library of products and bring some robustness to that,” he said.
For more than a decade, Wal-Mart has struggled to find its way with online sales.
Wal-Mart launched a basic website in 1996, but it was largely ignored by early Web surfers. Wal-Mart renovated the site in the fall of 1999, but it had trouble getting products to customers by Christmas.
It overhauled its website in 2000, but by then Amazon.com was taking off and remains the online leader with $48.1 billion in revenue in 2011 — barely one-tenth of Wal-Mart’s total take, but an increase of more than 40 percent in a single year.
Wal-Mart treated its online version as “a little bit of a stepchild,” Craig Johnson, president of Customer Growth Partners LLC, a retail consultant in New Canaan, Conn., told Arkansas Business in December 2009.
But these days, the e-commerce and social media acquisitions that Wal-Mart made show it wants to improve the customer experience both online and in the stores, said Liz Miller, the vice president of marketing programs and operations for the CMO Council, a global network of more than 6,000 senior marketing executives headquartered in Palo Alto, Calif.
“I think that’s a huge plus, because for a long time, Wal-Mart had been criticized for not bringing itself into today’s consumer base,” she said. “And I think a lot of these moves really point to the fact that Wal-Mart really listened to that.”