Posted July 11, 2007 12:25 pm by with 3 comments

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I recently listened to a presentation from Brian Osborn, VP of Marketing for Here are some worthwhile takeaways for e-tailers.

1) recently went through a large redesign to change their customers’ perception of their site, the Wal-Mart brand, and the merchandise they sell. In a nutshell, they made the site less cluttered–simpler navigation and fewer featured products on the home page and category pages.

Their research showed that customers reacted well to the new design. One key difference is that the customers seemed to believe that the products were of higher quality because of the less cluttered look.

We believe this is true at Vitabase as well and have moved in that direction in the last year. We were influenced partly by our observations of offline retail. Go into an upper-end department store such as Nordstrom and compare the look of their displays to a more moderately-priced store. You will see that the higher-priced stores seem less cluttered with more breathing space and fewer choices. In fact, Brian mentioned that the brick and mortar Walmart stores were being redesigned with this principle in mind.

2) Their Site to Store program is a big hit. In this program, online buyers purchase merchandise which is shipped to the local Wal-Mart without the customer paying any shipping charges. Wal-Mart is rolling this program nationally during the summer.

The ramifications of the success of this program are more significant to internet retailers than you would at first believe. First, it is interesting that shoppers are willing to drive to pick up merchandise to save on shipping. But on the other hand, why not? Most of them go to Wal-Mart weekly anyway.

Secondly, and more importantly, recognize how Wal-Mart is using their multi-channel distribution to their advantage and creating a marketplace that online-only retailers are going to struggle in. Wal-Mart can ship products to stores very inexpensively since they have trucks going there anyway. That gives them a huge advantage over almost every online retailer.

Also, getting shoppers into the store to pick up merchandise is beneficial because Brian mentioned that half of the customers picking up online orders spend an additional $60 while in the store.

Currently, many online retailers have one advantage over Wal-Mart–they do not charge sales tax. However, that probably will change within a few years. Consider that once the tax playing field is leveled, Wal-Mart will have huge advantages in reduced shipping costs and the ability to upsell to customers in the store (meaning they can accept lower margins on online sales).

So, unless you have multi-channel distribution set up, I can’t imagine how an online retailer is going to have a chance going head to head with Wal-Mart on price. And if you think you are in a niche that Wal-Mart cannot compete in, think again. Wal-Mart has a huge inventory selection online–much larger than in their stores. As an example, they usually only have about ten baby crib selections in their stores, but customers can order up to sixty different cribs online.