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[22 comments]

Walmart.com Goes All Click & Mortar in SoCal

November 8, 2011

Walmart is going smaller with its stores, but a new test, if successful, could push the retailer to even tighter confines. According to several reports, Walmart.com has opened a couple of pilot locations that showcase key items throughout, such as toys and consumer electronics, but direct people to the internet to actually make their purchases.

According to MarketWatch, the two test locations in California are 1,000 and 3,000 square-feet respectively. They are located in downtown malls in Los Angeles and San Diego where the company has no presence currently.

"I think they have access to consumers that they don't normally get," George Whalin, president and chief executive of Retail Management Consultants and a RetailWire BrainTrust member, told NBC San Diego. "It is a very valid idea and I think during the holiday season they will do well."

Ted Hurlbut, principal at Hurlbut & Associates, also a member of the RetailWire BrainTrust, told MarketWatch, "Wal-Mart is trying to understand more fully how it can integrate brick-and-mortar and online operations. But my sense is Wal-Mart customers are latecomers to online because of their income level and will stick to stores."

Walmart has not announced any plans to extend the concept past the Christmas selling season and is waiting to see results before making that decision.

FINANCIALS:     [NYSE:WMT]

Discussion Questions:

Discussion Questions: Do you think the Walmart.com small format concept has legs? Do you see it as a year-round or seasonal concept?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely do you think it is that Walmart will expand the number of Walmart.com locations it opens?

Comments:

Well, it certainly solves the "we don't want your big box store in our neighborhood" problem, and also institutionalizes the concept of store-as-showroom.

It's going to be a successful concept for someone -- whether the Walmart customer is sophisticated enough to make use of it or not remains to be seen.

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Paula Rosenblum, Managing Partner, RSR Research

In a word, YES. Not only does it have legs, but it could easily be a year-round concept that may very well change the face of click-and-mortar hereafter.

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Dave Wendland, Vice President, Hamacher Resource Group

This BMI concept (brick/mortar/internet) certainly brings several benefits for both Walmart and the consumer. It allows Walmart to enter markets in which they have been unable to build (due to zoning or other restrictions) or markets that won't economically support a Supercenter. The customers get to see the merchandise, handle it, etc. -- all the things they can't do over the internet. By providing computers for the shoppers to use, Walmart will be able to capture sales from those who might not have ready access to one at home and also captures sales from people who might later decide to buy somewhere else.

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Steve Montgomery, President, b2b Solutions, LLC

For a company to be successful in the future, it must look at its future customers. If Wal-Mart wants the maturing Gen-X and Millenniums to be Wal-Mart loyal, they better be thinking about how to meet their needs.

Wal-Mart has committed to the Big Hairy Audacious Goal of surpassing Amazon. The competitive advantage they have is stores just like these that they are testing.

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Gene Detroyer, Professor, Independent

If these small stores have the actual item present so consumers can sample it, the concept might work, especially when combined with WM's low price guarantee. Consumers can come in, handle the physical products, compare prices online, get the guaranteed lowest price from WM and then have the item delivered for free to home...it makes sense to me. Few retailers could pull this off. WM is one of them.

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Max Goldberg, President, Max Goldberg & Associates

Yes, the Walmart.com small format has seasonal legs in large, congested markets such as those in California and in areas where the "big box" is not wanted. But does this concept have sufficient appeal to be a year-round venue? The jury is out on that question.

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Gene Hoffman, President/CEO, Corporate Strategies International

I think this is an excellent integration of bricks and clicks and it especially works well in the tighter confines of retail real estate-challenged downtown cores. Why not take it a step further and build it like a pop-up store that can travel the trade show circuit? I could see this working for bridal, housewares and gift shows and the always high traffic home improvement and DIY mega shows.

Doron Levy, President, TheMortgageMachine.ca

Absolutely. I applaud Walmart for anticipating the direction retail is headed: stores as show rooms; online as fulfillment; smaller footprint and more integrated. Totally to their credit that they're experimenting with how this will play out and not waiting for it to hit them by surprise. This is less about today's sales and more about getting smart for tomorrow's operations and store formats.

Lisa Bradner, Chief Strategy Officer, Geomentum/Shopper Sciences

As a kid growing up on a rural farm in the middle of nowhere in the middle of the last century, a "big deal" trip was a visit to the tiny Sears store in the next town to poke at things that we'd then order from the catalog. Sears stopped doing this. Perhaps we've come full circle, but I have my doubts.

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Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer

It's important to understand where this store is located. It is in an urban mall that caters to tourists and people living in nearby condos and apartments. In recent years, the population in downtown San Diego has grown dramatically to include a significant number of affluent young professionals and older people who simply enjoy living in a city environment with nearby restaurants, entertainment venues and shopping. The Walmart e-commerce store may turn out to be quite successful.

George Whalin, President & CEO, Retail Management Consultants

This plan has potential. They are locating in areas where they have no presence, thus stimulating sales and interest with customers they normally would not have. Walmart again is leading the race to find those customers they can't reach. Good thing Target's main color is red so we will not see the embarrassment from being beaten again.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

As predicted, stores are morphing into pick-up depots and mini showrooms and, for Walmart, their most important doors will not necessarily carry inventory. It's going to get interesting!

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Carol Spieckerman, President, newmarketbuilders

The concept appears to be a test of the belief that the inability to physically see, touch or experience a product limits some shoppers from buying online. By having demo or presentation samples available, WMT has created a hybrid to test this assumption. Rather than simply taking market research as valid, this will provide actual data. The possible disconnect is related to how the locations will be marketed, and to whom. If the intention is to increase online conversion, it's unclear how WMT will drive online traffic specific to these physical locations to the new formats. If the intention is to convert a segment of traditional brick & mortar shoppers who want access to the WMT assortment but not the WMT in-store experience, that is an entirely different subject.

Don Delzell, Managing Director, Retail Advantage

I like to watch what has happened with virtual goods and anticipate how that applies to the distribution of physical goods. We have watched as music has gone from LPs, to cassettes, to MP3, to streaming. We have watched video go from tape, to DVDs, to streaming. Newspapers have bifurcated their offerings into free and fee-based content; it is as if the free content has become an index to the fee-based.

Wal-Mart is right on with their small footprint Walmart.com outlets. They are in effect creating an index to their merchandise selection. I also like their alternatives for fulfillment, offering delivery to the ordering location, another store, or the home. While it appears they will charge for home delivery, they will also issue credits toward another purchase. This all emphasizes the role of the retailer to bridge the "last mile" in the distribution channel to the consumer.

One of my concerns with online shopping has always been the abandonment of the shoppers who don't have easy access. I know it is hard to believe (especially living in the NY Metropolitan area), but there are still areas without broadband Internet access. I also still see a lot of people using the terminals in the library. These stores will offer online access to people who might not have the necessary equipment or subscriptions; this could be a significant number of Wal-Mart shoppers.

Now we'll just have to keep our eyes open for the Wal-Mart tablet.

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Bill Bittner, Principal, BWH Consulting

"Honey, I'm going down to Wal-Mart to order something online." Why don't I hear that being said too often? Plaudits for Wal-Mart trying something new, and for trying to take on Amazon. Greatest benefit could be to shoehorn electronic stores into new markets.

'OFLC'

I don't disagree with George that this puts Walmart in the vicinity of consumers they might not otherwise attract to their stores. On the other hand, there's nothing saying that by being in the face of people who don't shop you, you'll convert them.

My sense is that people who could shop Walmart.com but choose not to aren't making that choice because they didn't know Walmart offered online shopping. I also don't think it's because they don't own computers or know how to use them. It's more likely because they don't want to shop Walmart at all. And perhaps that's the real problem that Walmart needs to reckon with.

Doug Stephens, President, Retail Prophet

I see the value in this as being seasonal in the short term, but more beneficial in the long. I view this as a relatively low-cost, likely effective and efficient way to *quickly* insert the Walmart brand into a dense locale to: 1) market and strengthen the brand, and 2) promote holiday sales via Walmart.com especially in specific targeted markets and demos. It's like a Walmart embassy in enemy territory. Okay, maybe "enemy" is a bit over the top. But I like the Walmart embassy idea and think it makes sense, especially in targeted markets.

Clearly it's also taking advantage of retail vacancies, but doing so still in a modest, slim way. It appears a well-conceived, strategic test with quite frankly nothing to lose. And I could see value in spreading, depending on results. Perhaps embassies will pop up nationwide in a mall near you!

Alternatively, in a way it's a much more sensible approach than Sears/KMT's test of MyGofer, which in essence is taking a large under-performing store and trying to promote this new online shopping concept. MyGofer comes off to me as purely an attempt to convert a vacant building, an existing liability and previously under-performing store into something more productive. But there's little brand-enhancement, in part because the test location(s?) is/are not in strategic locations (Joliet, IL as example).

Drew McElligott, Director, Brauvin

I think this is a good test for Walmart. It combines the visual impact of viewing products with the ease of ordering and delivery offered by online shopping. In addition, it gives credence to the theory that Walmart sees Amazon.com as its major competitor going forward. Brick-and-mortar operations for Walmart at the same size and scale that fostered its growth will become more expensive and difficult to achieve in today's market. Online will be the next frontier for Walmart to attempt to conquer and dominate.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

Not saying this is a bad idea but isn't it nice of Walmart to do Amazon's test marketing for them? Isn't this a great concept for Amazon? I have been waiting for Amazon to create physical stores.

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Joel Rubinson, President, Rubinson Partners, Inc.

No matter how much we like to think otherwise as we click an order for new shoes from the sofa in our jammies, shopping is and remains a social activity. No matter how great the websites get, touching and feeling is still a desirable part of the shopping experience. It's all the other stuff about it that creates the aggravations about the experience.

This concept can be just as effective year round as it can be seasonally. Wait, year-round is seasonal.

For example, last spring I was close to purchasing a lawn mower online. Had there been a place to put my hands on it, I might have done so. Instead, I purchased it from the local retailer where I could. I would and did wait three days to get it. Was there a difference? Was this a seasonal purchase or a year-round purchase? See what I mean? (Hint: Three major DIY retailers in my region stock them year-round.)

Showroom? Order placement? Pick-Up Center? Service Center? My goodness, it sounds like a catalog store doesn't it?

'Scanner'

Yes, the Walmart small format concept has a good chance of success -- location critical.

The San Diego downtown site -- Horton's Plaza -- has foot traffic from offices nearby during the week as well as tourists and destination shoppers from the suburbs. This looks like a good choice. And there is a good cross section of shoppers and right mix -- younger lunchtime and after hours browsers at the mall, so headed in the right direction.

The idea of an internet "catalog store' may appeal, particularly with the choice of pick-up delivery sites. Local workers have time to browse here, and would appreciate convenience of delivery options instead of having to haul items back to the office, car, or public transport. Could definitely be a year round location at this site.

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Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

I believe this "could" have legs and "could" be applied year round, however this is a big "could." Walmart really needs to think about their value proposition today and tomorrow, and determine if a "browse in store, buy online, deliver later" concept will appeal to their current and future target customers.

I believe it will most likely be applicable in locations in high population urban centers where customers are not interested in carrying the item home with them.

As a side note, seems like an interesting marriage of the old Service Merchandise in-store shopping model, with at home delivery instead of service desk delivery.

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Verlin Youd, Principal, VPY LLC

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