Page 145 - Electronic Commerce

Chapter 3

their operations to the Web. Other companies that use the Web catalog revenue model
adopted it after realizing that the products they sold in their physical stores could also
be sold on the Web. This additional sales outlet did not require them to build additional
stores, yet provided access to new customers throughout the world.
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Discount Retailers: Getting a Great Deal Online
A number of discounters, such as Overstock.com, began their first retail operations online.
Borrowing a concept from the physical world’s Walmarts and discount club stores, these
discounters sell merchandise at extremely low prices.
Traditional discount retailers, such as Costco, Kmart, Target, and Walmart, were
reluctant to implement online sales on their Web sites, which they used originally for
general information distribution. They had huge investments in their physical stores, were
making large amounts of sales in those stores, and did not really understand the world of
online retailing. However, after some false starts and learning challenges, all of these
major retailers now use the Web catalog revenue model in their online sales operations.

LEARNING FROM FAILURES

Walmart.com
Walmart is the world’s largest retailer, with thousands of stores and annual sales
exceeding $470 billion. Founded in 1962 by retailing legend Sam Walton, the company
has won numerous awards for business innovation. However, Walmart’s moves into
online retailing have been troubled.
Walmart launched its first Web site in July 1996. Like most company sites of that
time, it contained some information about the company, but did not offer any products
for sale. WalMart did little to develop the Web site over the next three years, but it did
add a Web store—just in time to participate in the disastrous 1999 holiday shopping
season.
Walmart was not the only Web retailer to have trouble in 1999. Many companies
found that they were ill-prepared for the large number of customers who decided to try
electronic commerce in that year’s holiday season. Lost orders, unfilled orders, and
shipments that failed to arrive until January 2000 were common for many Web retailers
that year. Walmart was noted as an industry leader in shipping and logistics manage-
ment; however, the announcement on its Web site that it could not promise Christmas
delivery for items ordered after December 14 was particularly embarrassing.
To make matters worse, Walmart was in the middle of developing a new Web site
that it had hoped to launch before the holiday season. The project, which industry ana-
lysts estimate cost more than $100 million, ran months late and did not operate until
January 2000.
Continued

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