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Wal-Mart Has High Hopes for the Holidays


Raul Vazquez wants to be the Grinch who steals Christmas—for Wal-Mart, that is. Vazquez, the CEO of Walmart.com, told BusinessWeek he expects as much as a 30% gain in online sales this holiday season compared with last year. That would far outpace the 8% to 10% projected rise in industrywide retail e-commerce this year. Total U.S. holiday retail sales are expected to be $438 billion, down 1% vs. last year, according to the National Retail Federation. Wal-Mart (WMT) does not break out financials for its Web site, but Vice-Chairman Eduardo Castro-Wright has said it generates several billion in annual sales. That's a drop in the bucket for the $400 billion retailer, but certainly growing at a much faster clip than the company's overall sales, which rose 1.1% in the third quarter. By integrating the inventory of three third-party retailers under a program dubbed Marketplace that launched in August, the site now offers 1.5 million items, 10 times the inventory of a typical Wal-Mart Supercenter. New categories include health and beauty aids, which were added in October. "We don't have food—yet," Vazquez says, smiling portentously. Walmart.com Claims Top Sales GrowthVazquez, an El Paso native who joined Walmart.com's marketing department in 2002 and rose to the top job about three years ago, says his goal is for Walmart.com to become "the most visited and most valued online retailer." Right now, the two most visited e-commerce sites are Amazon.com (AMZN) and eBay (EBAY), and Vazquez clearly has both of them in his crosshairs. According to market research firm Experian Hitwise, Amazon is the leading online retailer with a 15% share of visits, while Walmart.com is No. 2 with 7%. (Hitwise excludes eBay as it's primarily an auction site.) Vazquez claims that Walmart.com's sales growth so far this year has bested Amazon's by 1.4 percentage points. Through the first three quarters of 2009, Amazon's sales have increased 20%, rising 28% in the third quarter. "We're growing the fastest now among the leading sites," Vazquez says. Several retailers, such as Sears, Staples (SPLS), and Best Buy (BBY), are already offering Black Friday (day after Thanksgiving, the traditional start of the holiday shopping season) pricing on certain products. Vazquez will also have to grapple with Scrooge-like consumer sentiment this year. More than three-quarters (77%) of American consumers feel pressured by debt this holiday season, according to a new survey by America's Research Group and UBS (UBS). Of those, 65% say they will spend less this year. New research from Nielsen, meanwhile, found that those who do plan to shop online this holiday season expect to spend significantly less. Last month, Vazquez incited a well-publicized price war with Amazon and other online retailers by offering 10 best-selling books online for $10, and then reducing the price to $9, and then $8.99, when Amazon counterattacked. "We will go as low as we need to" to maintain Wal-Mart's position as the low-price leader online, says Vazquez, adding that book sales on the site were up "in the triple digits" in October. Wal-Mart recently extended the $10 offer to the top 10 preorder movie titles, such as Disney (DIS)-Pixar's Up. Shipping BargainsVazquez also says Walmart.com is the most visited online retailer on certain days of the year like Thanksgiving, according to Hitwise. He expects more than 350 million online customer visits between November and January, and 10 million alone on Thanksgiving. To boost sales this holiday season, Vazquez is now offering 97¢ shipping on all electronics, even huge flat-screen TVs that normally carry shipping charges of about $20. (Previously the 97¢ shipping was available for just toys and video games.) On Thanksgiving Day, Walmart.com will offer about 50 popular gift items at up to 40% off. Shipping is free if customers elect the popular "site to store" offer, whereby Wal-Mart ships any item purchased online to the customer's nearest store at no charge. Today about 40% of Walmart.com's business is site-to-store orders. But Wal-Mart is not alone: Amazon offers free shipping on most orders of $25 and up, and Toysrus.com has it on thousands of items with a $49 purchase. While 25% of retailers offered free-shipping deals during the holidays five years ago, more than half say they'll do so at some time this holiday season, according to Shop.org, the e-commerce division of the National Retail Federation. One big development this year is the use of social media to drive customer traffic and sales. Best Buy, for one, has been quite active on both Facebook and Twitter, and Chief Marketing Officer Barry Judge boasted at a recent media briefing that the electronics retailer has received 20,000 questions from customers via Twitter since July. "That's monetizable," he said, although he didn't explain how. Vazquez is not so sure. "[Social media] can help drive sales but elements of it are still being worked out," he says. "We're still testing and learning." He had better learn fast: Best Buy's Facebook page has 1 million fans, vs. a paltry 50,000 for Wal-Mart.
Boyle is a reporter for Bloomberg News and Bloomberg Businessweek in London.

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