RELAUNCH OF WAL-MART'S WEB SITE EXPECTED SOON

KRISTIN YOUNG

PALO ALTO, Calif. (FNS) -- Internet observers are anticipating another relaunch of Wal-Mart.com here. Some say it could occur sometime before the holidays -- even though a new version went live just this February.

Since 1996, when Wal-Mart first mounted an Internet presence, Web watchers have wondered whether the site at wal-mart.com is meeting consumers' standards, let alone exceeding them.

"There's a lot of ambitious ideas in mind," said Bruce Golden, a partner of Accel Partners, a venture capital house that joined forces with Bentonville, Ark.-based Wal-Mart in January to form Wal-Mart.com as an independent company that's majority-owned by Wal-Mart. "The areas you can expect improvements in are in site navigation, overall consumer experience and new services," he continued. "I think people will be very excited as some of that innovation starts to be unveiled. I'm close enough to it to be confident in that."

Golden declined to say more. Jeanne Jackson, former chief executive officer of Banana Republic who signed on with Wal-Mart in March, and other Wal-Mart.com executives declined to be interviewed for this story.

Wall Street and Internet analysts said they have been given few clues as to the future of Wal-Mart's Web site and don't know what consumers could expect. To date, few improvements have been visible on the site itself, or in the company's roughly 4,000 stores worldwide, which could be leveraged via cross-promotional efforts and integrated operating systems.

From the outside, it appears that Wal-Mart.com is starting from scratch, according to some analysts, who point to Wal-Mart.com's purchase in July of the technology assets of HomeWareHouse.com, a San Mateo, Calif.-based e-tailer that has ceased operations. Many members of the defunct e-tailer's engineering and design teams have joined the Wal-Mart.com staff.

Observed Ken Cassar, a senior retail analyst at Internet consultant Jupiter Communications, the HomeWareHouse acquisition "suggests they didn't have [technology platforms] worth carrying forward; they didn't have anything built internally that was worth keeping."

"The site interface has yet to blow me away," Cassar added. "I guess I've always assumed they'd start off the back end and eventually figure out the front end. Apparently, they haven't sewn up problems on the back end."

A spokeswoman for Wal-Mart.com conceded the site is currently working on fixing a number of problems.

The current Wal-Mart site, which went live on-line in February, has not impressed many industry observers. "It was definitely a step forward but to have waited all quarter for it, it wasn't anything to write home about after all," said Seema Williams, a senior analyst at Forrester Research, Cambridge, Mass.

Many have found that Wal-Mart's site is still clunky, hard to navigate and riddled with product-fulfillment problems. Indeed, following its latest relaunch, retail consultant Kurt Barnard of Barnard's Retail Trend Report, said, "The new site was supposed to end all Web sites but is a disappointment to the company and others hoping to be able to place orders."

Hopes for a more robust rebound were raised when Wal-Mart partnered with Accel, establishing a separate board of directors and management team for the dot-com division and relocating its headquarters here, where Accel is based, thousands of miles away from Wal-Mart Stores' home offices in Bentonville. In June, Sam Dunn, a 13-year veteran of Wal-Mart, joined the on-line unit as chief financial officer, and John Rittenhouse, who directed logistics for brick-and-mortar and on-line stores of DFS Group Ltd., took the logistics post at Wal-Mart.com. Plus, Jackson is credited with leading the on-line programs for all three Gap brands: Gap, Banana Republic and Old Navy.

"We have very high expectations for the Wal-Mart.com effort," said Bill Dreher, a research analyst at Robertson Stephens.

More than $100 million has been invested in the site, according to Dreher, who estimated the on-line business currently is shaving about a penny per share off of the annual earnings produced by Wal-Mart's brick-and-mortar stores.

Wal-Mart.com's board consists of Rob Walton, chairman of Wal-Mart Stores; Lee Scott, Wal-Mart CEO and president; Jim Bryer, managing partner in Accel, and Jackson. "They're going to be able to quickly make decisions and respond to the competitive environment at Internet speed," said Dreher.

Meanwhile, Wal-Mart.com is facing toughening competition this year. In February, Bluelight.com, Kmart's Web site, began outperforming Wal-Mart.com in efforts to attract customers, according to Web ratings agency Media Metrix. The trend has continued through June, according to the most recent data available.

Melissa Berryhill, head of public relations for Wal-Mart.com, said based on the feedback from consumers via a 1-800 number, the company is now focused on providing better customer service, which means executing orders efficiently.

As an independent company, Wal-Mart.com can set its own pricing but is still able to utilize Wal-Mart's logistical expertise, distribution network, a large customer database and integration with stores, which can serve as a destination where customers can pick up or return their on-line purchases.

Berryhill acknowledged there are kinks to be ironed out on-line. "We don't think we're giving customers the level of service they deserve," she said. "We're focusing on that."

Another problem related to product fulfillment, say analysts, is the vast amount of goods Wal-Mart.com could sell on-line. With categories ranging from apparel to appliances (but not yet including food), "The product assortments that Wal-Mart sells doesn't lend itself to the Web," said Cassar. "They are hampered by the breadth [of goods] that they offer in their brick-and-mortar stores. Some products that Wal-Mart sells are difficult or impossible to ship."

Getting people to shop on-line appears to be one of the more basic challenges for the company. In December of 1999, Wal-Mart struck a deal with America Online, with the goal of offering Wal-Mart customers Internet access at a very low fee. Wal-Mart plans to distribute the Wal-Mart/AOL Internet service provider on AOL software that includes a link to Wal-Mart.com. The two companies have agreed to work together to increase the site's availability in communities that don't yet have local Internet access. Six out of every 10 towns in which Wal-Mart operates do not have local access, according to the companies.

But when one enters a Wal-Mart store, one notices few real world tie-ins to Wal-Mart.com. There are no cross-promotion marketing efforts save for a few logos on trucks and trailers. The AOL disks are nowhere in sight. "It's not in stores now," Berryhill said, "but we're working toward it."

An even more difficult challenge, according to analysts, is to get the more affluent customer who is already on-line to shop Wal-Mart.com, much as trendy Target has lured more affluent shoppers to its brick-and-mortar stores. "You know what you're buying from Gap; you don't know what you're buying from Wal-Mart," said Forrester's Williams

Most analysts are relying on the power of the Wal-Mart name and brick-and-mortar success of the "Always low prices" philosophy to outline the future possibilities of Wal-Mart.com.

"Wal-Mart has done a pretty good job of out-maneuvering Kmart on land and I would imagine over time you would see the same result on-line," said Shari Schwartzman Eberts, a senior research analyst at J.P. Morgan. "The game's not over, obviously."