STUDY WAL-MART FOR NET SUCCESS: PRICELINE VP

DAVID ORGEL

DUBLIN, Ireland -- Companies vying to succeed in the new world of Internet commerce might study the history of Wal-Mart for inspiration, according to Rob Voss, executive vice president of merchandising at Priceline.com, Stamford, Conn.

Voss, a former executive at Wal-Mart's Sam's Club unit, said that Wal-Mart's sales grew from $235 million in 1975 to about $155 billion today.

How did Wal-Mart become the world's largest retailer? "They did it one store at a time and thought outside the box," he told an audience at the CIES Executive Congress here. "The company isn't managed by Harvard MBAs. It's managed by people who worry about what's best for the customer."

Perhaps most importantly, Voss said, Wal-Mart founder Sam Walton was on target when he claimed that saving the customer money was the key to success. That philosophy changed the way consumers shop and the way consumer packaged-goods companies and retailers handle their businesses, he said.

Wal-Mart's core philosophy is similar to Priceline's, Voss said. Unlike Internet retailers that are geared to home-shopping convenience, Priceline's service, which includes its Webhouse Club grocery operation, aims at saving consumers money.

"The Internet isn't about delivering to people's homes," Voss contended. "But if you can save consumers money for 15 minutes of ordering goods on-line that they then pick up at the grocery store, then you can interest customers."

Voss' picture of the Internet might be disputed by home-shopping services, but the company's early success has led analysts and other observers to take note. Webhouse, which began in the New York City area in November 1999, has grown to a 20-state region on its way to national coverage, Voss said.

Voss said Webhouse also borrows from the lessons learned by warehouse clubs. "A traditional Wal-Mart supercenter with 130,000 stockkeeping units does about $100 million a year," he said. "But a large warehouse club does more volume with only 4,000 SKUs. So we realized you can succeed with a limited assortment."

Priceline Webhouse Club carries only 200 national brand items on its site. Its business plan, like that of the warehouse clubs, promises consumers savings if shoppers are willing to show some brand flexibility. But Priceline carries that concept further by asking consumers to choose prices and brands while agreeing to accept the final picks they receive from Priceline.

Voss' most basic word of advice to executives is about the viability of the Internet itself.

"A lot of business executives wish the Internet would go away. They only want to know how to increase market share and don't want to worry about new complications. But the Internet is not going away."