Walmart Ecommerce

Executive Summary

In this paper our group explores the many ins and outs of the huge business Walmart and its online presence through Walmart.com. We start off our project buy looking at Walmart through the Porter’s five forces analysis. Porter’s five forces analysis allows us to take a closer look at what it would take for a new company to come into the market with Walmart, possible alternatives to shopping at Walmart, how much power consumers have over Walmart’s business plan, what role Walmart’s suppliers play in the company, and how Walmart measures up against the rest of the market.

This is done to establish a current market situation analysis so that a general background of Walmart is given before getting into specific details in the e-commerce plan. Next our group discusses what keeps Walmart focused on developing their e-commerce into what it is today, as well as the rationale for doing so. It is in this section of the paper that our group covers the introduction of the Walmart application for smart phones as well as the positives it provides to consumers using it. We talked about the Walmart application to drive home the fact that Walmart e-commerce is ever changing to keep up with current consumer trends which include shopping convenience and even the emerging smart phone craze currently going on.

The paper is concluded by our group taking an overall look at everything Walmart.com has going on as well as how it’s come along since its creation to provide a little further in depth understanding of why and how Walmart is trying to capture more online consumer market share. Also in our conclusion of this report our group came up with some creative ideas to expand on Walmart’s e-commerce to drive them to the number one spot over Amazon and eBay. Our recommendations included going in and improving servers for the Walmart.com store and the Walmart app and more online personalization.

Market Analysis

Porter’s Five Forces Walmart.com is in the industry NAICS code 454111. They define it as a store retailing or a combination of store retailing and Internet retailing in the same establishment. In short the industry is bricks and clicks.

New Entrants Anyone can sell products on the internet; all a person would need is a site and a product to sell. It is a little harder to compete on the business level of Walmart.com. To be known as a price leader and sell a large amount of different products gives Walmart.com an advantage. Most other firms with a physical location also have a site where consumers can purchase products. A large amount of capital is needed to sell a large variety of goods which could be a barrier of entry to some lesser companies. Another reason that the threat of new entrants can shake the industry is because of the low switching costs. Consumers search the web for the product they are seeking which sometimes involves pre-research and other sites checked.

The consumer has an evoked set of sites they will purchase goods from. Switching between sites is not a problem for the consumer as long as they can rationalize the reason for switching (better price, better company, etc.). The only cost to the costumer is the time and energy spent to search for the better deal. To the consumer saving a few dollars would be enough to search for the better deals. The threat of new entrants has to be low to medium which is good for Walmart. Also since the industry deals with technology, a change could be made that reshapes the industry as we know it today which could be for the better or worse for Walmart in the long run.

Substitutes The treat of a substitute is high. There are other pure play sites that people will go to when searching online, Amazon.com, ebay.com, and others. Amazon.com had 20% of all online sales during June 2011 (http://www.businesswire.com/news/home/20110823005719/en/Fifty-Percent-Global-Online-Retail-Visits-Amazon).

During that same time span, 650 million people visited Amazon, eBay and Alibaba. Walmart is not the only main player on the web obviously. Since the other substitutes are very similar, consumers tend to be more sensitive to prices. With the low switching cost and high substitutes, the prices for these sites are very comparable. Other substitutes are the physical stores and mail orders. A lot of consumers research their products online to purchase the product in person at a physical store. Some consumers do not feel safe using the internet to purchase their products. The fear of identity theft is enough to deter consumers away to the physical stores and mail ordered goods.

Buyer Power Walmart.com is a B2C site. B2C sites sell to the individual costumer. With low differentiation and low switching costs, the buyer gets a little more power. People tend to be goal oriented when it comes to shopping for their products at low prices. With these price conscience customers, Walmart.com and other sites, have to respect this and have to keep their prices competitive online. However, the individual does not have power over the seller.

The individual does not buy enough to effect the sales of the site, so changes to the site’s activities don’t depend on one or a few buyers. This weakens the power of the consumer. The buyer cannot deal with the company and bargain on price. Buyers have a low power over the company, which means they are price takers not setters.

Supplier Power Suppliers have limited power over the companies. The industry in some cases controls the suppliers though. Walmart can drive the prices down on many items giving them a cost advantage. Some suppliers are more important than others, but there are other companies that would fill into a store or site without hesitation. At the same time, Walmart has set up a network to allow orders to flow easier to their suppliers, speeding up the process, and creating a competitive advantage. Some suppliers could skip the store and sell straight to the consumer though. The suppliers know that companies like Walmart already have a strong distribution network and that is how they have an edge over suppliers.

Industry Rivalry Shopping online can take a consumer to a seemingly endless number of sites. Walmart has a strong presence in the physical world but online Walmart.com is behind amazon.com by a long shot. In terms of online sales, Walmart.com ranks sixth in the US and Canada with just over $4 billion in online sales (http://www.internetretailer.com/top500/list/). Walmart.com is still far from the pace setting $34 billion in sales amazon.com creates (http://www.internetretailer.com/top500/list/).

The growth with online sales has been shooting through the roof, meaning that the market leaders are not battling to the death for a larger piece of the pie. The United States spent $36.3 billion in the third quarter in 2011, up from $32.1 billion during the same time the previous year (http://www.internetretailer.com/2011/11/09/e-retail-sales-rise-13-q3). The 13% increase in sales is a large increase in one year’s time in a country where the online retail infrastructure is already established.

Online, the entry and exit barriers are low compared to other industries. All the seller has is inventory and the cost of the web site. When barriers are high, firms are forced to compete with each other more intensely. The entry cost allows new retailers to gain the ability to enter the market. On the other hand, if a firm wants to exit the market the entire firm is invested in the cost of the site, inventory, and some advertising costs. These costs for the firms that compete with Walmart on and off line have a lot of money tied up in the web side of their business. A lot of money was invested in Walmart.com, which makes it user friendly and allows people to find and purchase products they are searching for effortlessly.

The other costs of running a web site is less expensive than having a brick and mortar store front. The web development and storage costs are the major costs for firms in the online and physical store locations. Along with the physical stores, distribution and warehouse costs are potentially going to be less than pure-play sites. Sites like Walmart.com are going to benefit from economies of scale from their warehousing and distribution centers. General retailers who sell a vast array of products run into the same problem, the products are basically the same. When products are not differentiated, the level of the competition increases. The products cannot differentiate the seller from their competitors.

E-Commerce Rational

Last year revenues for Walmart totaled at just over four-hundred and five billion dollars. This is because Walmart is a price leader all of its own, with countless deals and the lowest prices around it is no wonder that Walmart draws so much revenue. Walmart launched its online store in 1996 to fully accommodate the emerging market which would later lead to current day success.

Walmart e-commerce has come a long way since it was first created. In 1962, Sam Walton opened up the first discount store that would later become the leading retail store for country. In the 70’s Walmart grew to 38 stores and 1500 associates. Stock was splitting 100% between shareholder’s equity at $47 a share. Since 1962 Walmart has been improving their company on site in the stores as well as improving the company’s virtual presence through e-commerce.

Walmart, like other big businesses has the goal to become the biggest e-commerce retailer out there. This was not as easy as they expected because they have realized how hard it is by trying to capture more e-commerce business from consumers. In the late 1990’s, Walmart was concentrating on building physical supercenters instead of focusing on their new Walmart.com, which proved to work at the time. The last couple of years though, Walmart has seen a steady decline in sales after the first year of the brand new super centers. Could this mean that people were shopping online more? Yes, through consumer based research, Walmart has determined that more consumers are switching their shopping habits towards the online storefronts to add to personal convenience.

This was the fuel that fired up further development of Walmart.com, but Walmart.com actually hasn’t touched the top leaders of the online retailers, Amazon and eBay are the current big dogs, with Amazon at the top with 34 billion in revenue. Just in the recent years, Walmart has made some dramatic changes in their online service. Walmart has reinvented their “Pull” model in supply chains by shifting their inventories to include more of the popular items bought online to keep up with current trends such as with electronics. We all learn in Business 101 that a supplier has to change and adapt to current business trends to stay ahead in the market.

That’s why in 2010, Walmart combined all of its e-commerce into a global e-commerce division called global.com. This specific division only concentrated on e-commerce as a whole, not just for one region or area but for all the regions and areas Walmart.com does business in. The division has three specific goals that they want to achieve. The first goal is to develop a strong e-commerce strategy that complies with current trends. The second is to deliver this strategy and to generate growth to expand market share. The third goal of this unit is to come up with technology enhancements and to have applications for all Walmart markets.

The Walmart.com site is very easy to navigate through because of all the constant updates to keep up with current products and add to the ease of consumer use. This is done by improving product searches and search tools, and also with having the departments listed on the left of Walmart.com, users can still search manually through products. They also have added weekly sales to the top of the home page in a bold text so it pops out at the consumer and shows how many people shop from the site. Promotional pricing is also offered as free shipping on thousands of items, and with the free shipping on thousands of items, it can catch the eye of the consumer and entice them to buy something else so they won’t have to make a trip into the store.

Another cool feature they put on their website is the order online, pick up at the store feature. The consumers can make arrangements online to where all they have to do is walk to the service center and show them a receipt, then simply the employee will grab the item or items they purchased from in the back. This saves time by not shopping in the stores or waiting in the checkout lanes. Walmart has also made some changes to keep up with today’s technology.

One of the technological enhancements isthe Walmart.com application for smartphones. The Walmart application is available for download on all phones for free, and it is a great help when shopping at Walmart either at a physical store location, or online at Walmart.com. The application allows for users to buy products from their phones, make a wish list or registry either buy selecting items on their phone or buy verbal command in which users simply tell their phone what they want and it is automatically selected in the wish list, and by letting users see how much their item cost with tax included and if their product is available at their local store.

This phone application is definitely created with the consumer in mind, because consumers can find products they want very efficiently as well as purchase products either in physical stores or at Walmart.com. This application, as well as the many constant updates made to Walmart.com is just a taste of what e-commerce will be like in the future, because companies like Walmart are driven to out due the competition in order to make consumer shopping as easy, fun, and efficient as possible in order to capture market share.

E-Commerce Critique and Recommendations

After visiting and looking at Walmart's web page there is not really too much to improve on. The only thing that our group can really say is that there are a lot of coupons available online and on the web page that leads you to believe that you are not getting the best price unless you get one of these coupons which can be deceiving on their “Everyday low prices guarantee.”

The web page has made searching for products very easy whether it be by department or simply by product you can always find exactly what you are looking for. Walmart.com also offers users a chance to create an account to become a member, in which they send members special discounts and coupon offers as well as letting members know about the current good deals going on in the store. This always helps because Walmart can keep their name in front of consumers, which is a marketing positive. Also with Walmart.com's ability to set up wish lists and registries it only adds to the web site’s overall usefulness, which has been perfected since its creation.

Creating a profile on Walmart’s web page is simple and easy. It only asks for the basic information: name, age, address, email, local store, etc. Once the profile is created the site looks normal at the top, but the bottom part is where the difference is. The site shows items the consumer has previously purchased and viewed before. Along with those items, other items that people have purchased with it. With items that the consumer only clicked on, Walmart.com gives suggestions that other people who viewed that product “ultimately bought”.

Recommendations help the consumer find product the consumer wants with reduced time. Another feature that Walmart.com has is the site-to-store shipping. Although Walmart.com uses traditional shipping on every product, seemingly every product qualifies for the free shipping to the local store. Once the product has arrived at the local store, the consumer receives a text notification and email that the product has arrived. Lowering the time and energy costs to the users makes the shopping experience more attractive.

Walmart's e-commerce priorities have been very successful in fulfilling the current company’s goals and objectives. This is due to the application and ease of use of the web site in which consumers can go online at Walmart.com anytime and anywhere, wherever there is an internet connection. This is becoming increasing easier especially with the Walmart application available for any smart phone, which supplies consumers with the best prices, availability of items in their town Walmart, the ability to make wish lists just by scanning items with their phones, and also it tells you the total price, tax included of any item you are thinking about picking up.

The application also allows the user to create a shopping list of items in their local store, and check the items off as the consumer shops. A simple scan of the barcode brings up the price and reviews of the product. This satisfies the consumer’s price and quality assurance needs. During Black Friday though, some of the items were not coming up with the price on the application.

The product was not recognized on the application, but the price check locations in the store priced the products correctly. Also, the application has been down before due to heavy use by everyone who has it. On Cyber Monday, the application was not working. Any part of the application that needed to access the website did not work. If a shopping list already was created, it could be accessed and used, although no price checking or availability check could be done. Outside of these problems during major shopping days, the application is a great extension of Walmart.com.

The application can do everything the website can do and then some. The application is also always offering to go to the website as well. Walmart is trying to keep their potential customers locked into the Walmart cycle as long as possible. With a couple of quick changes Walmart can focus a little more on the customer.

Some changes we recommend that Walmart makes includes moving the information from the personalized account part to the top rather than the bottom, making searches a little more focused, and improving the servers online as well as the smart phone application servers too. Making these changes would not only make the web experience more personalized, but also make shopping online at Walmart more convenient and add to the overall appeal of Walmart to consumers. This goal is what Walmart needs to focus on in order to catch Amazon.com in online sales.

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