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Amazon.com, it's often noted, wants to be the Wal-Mart of the Web. Ditto America Online and Yahoo!

But what about Wal-Mart? Will the dominant retailer of the bricks-and-mortar world reign over the e-commerce universe as well, or will it be eclipsed by more nimble, cyber-savvy rivals? The answer should emerge over the coming months, but one thing is clear: No one mistakes Wal-Mart Stores' lackluster Internet presence so far as a sign of a sleeping giant.

"At the end of the next four years, Wal-Mart will be No. 1 on land and online," said Burt Flickinger, a consultant with Reach Marketing. "If Wal-Mart goes to Hasbro or Disney and offers a better price platform than eToys, they will get the shot."

In a distribution channel where good service is expected and price is often the deciding factor, Wal-Mart has a clear advantage.

"They have the best volume pricing in the industry," Mr. Flickinger said.

The world's largest retailer later this year will launch a megasite that will not only fortify its enormous on-land retail operation, but also potentially expand its customer base beyond its midmarket target. Although Wal-Mart has yet to reveal details of its plans, the discount chain has made a number of moves in preparation for a significant cyberspace play.


Wal-Mart has quietly hired Grey Interactive, New York, to build its Web operation. Grey joins a Wal-Mart stable that includes agencies Bernstein-Rein, Kansas City, Mo., and GSD&M, Austin, Texas, as well as Sam's Club agency Euro RSGC Tatham, Chicago.

In 1998, Wal-Mart spent almost all of its $240 million advertising outlay on traditional media. Now, Grey is staffing up for Wal-Mart's significant online effort. Wal-Mart also is expected to step up advertising in traditional media to back the site, although it is unclear whether Grey or another shop will get that assignment.

These moves "signal a big-deal commitment by Wal-Mart," said an executive familiar with the retailer's plans.

Wal-Mart, with its "Always low prices. Always" tag, currently splits advertising and media almost equally between its two primary shops.

Bernstein-Rein handles the smiley-face ads as well as product campaigns. GSD&M handles campaigns for apparel, lawn and garden, jewelry and photo processing. Holiday and seasonal ad campaigns are assigned after shoot-outs.

Both agencies recently completed pitches for 2000 back-to-school and holiday advertising.


In the bricks-and-mortar world, Wal-Mart is a giant in just about every major retail category. It's No. 1 in toy sales and a top player from apparel to music and from food to magazines. Its sales last year of $137.6 billion placed it far ahead of its nearest rival, Sears, Roebuck & Co., which had $41.3 billion.

But on the Web, Wal-Mart's presence has been anything but commanding. Its first site was launched in 1996 and currently offers a selection of items similar to those found on store shelves. It does have a few colorful items, such as door-to-door delivery of fresh Maine lobsters. But for the most part, the site does little to distinguish itself from rival retailers.

"Their first Web site had very little impact," said Tom Rubel, partner at PricewaterhouseCoopers. Online sales for Wal-Mart are probably less than those of just one of the chain's Supercenters, said another analyst.

Wal-Mart's site drew just 452,003 visitors in May, compared to 6.4 million for Amazon.com, according to Nielsen/NetRatings, which tracks the Internet market.

Now Wal-Mart, a company known for its technological prowess in inventory control -- Amazon.com had hired away several top executives from there to build its operation -- is set to make e-commerce a top priority.


IBM Chairman-CEO Louis V. Gerstner Jr. earlier this year said IBM is working on a major Wal-Mart e-business initiative. And last month, Wal-Mart reached an agreement with Federated Department Stores' Fingerhut Business Services unit to use 2 million feet of warehouse space for e-commerce sales fulfillment. Fingerhut earlier cut a similar deal with Kmart Corp. Wal-Mart's next deal is expected to be with an online drug retailer.

Just last week, Wal-Mart stomped into Amazon.com's main turf when it signed up Books-A-Million, the third-largest bookstore chain, as the exclusive supplier of its online book business.


All signs point to a major Web move by Wal-Mart before the crucial holiday retail season.

The chain has registered more than a half-dozen Web addresses, such as samsclubtravel.com and w-mtour.com, that hint at plans to get into the travel and vacation businesses. Wal-Mart recently moved to improve the style and quality of its apparel lines, one of the fastest growing areas of Web sales.

Analysts expect the next step to also include a fully stocked online pharmacy to compete with Drugstore.com, partly owned by Amazon.com and Rite Aid Corp. Drugstore.com has the most traffic of any online drugstore site, according to Nielsen/NetRatings.

PricewaterhouseCooper's Mr. Rubel expects the retail giant to turn its Web site into "a super world-trading-company-quality site where you can find things you wouldn't at Wal-Mart." That can be accomplished in part by offering products from its stores around the world in one place.

So far, Wal-Mart has not involved package-goods companies in its online plans, keeping the focus on higher-ticket items.

The retail kingpin may also see the Web as a way to draw a more upscale consumer than those who shop its stores; that's a path already paved by rival Target Stores.

Wal-Mart's current site (www.wal-mart.com) demographics skew below Web averages, though in some cases they remain somewhat above the demos of typical Wal-Mart store shoppers.

For example, 31.6% of U.S. households with Internet access in May had income below $50,000, while 38.5% of Wal-Mart Online shoppers fell into that category, said Peggy O'Neill, senior Internet analyst with Nielsen/NetRatings. Wal-Mart store shoppers' average household income is about $40,000.


Wal-Mart Online could benefit from two Net trends.

First, women are an increasing percentage of Web shoppers, and Wal-Mart Online in May generated 63% of its traffic from women, according to Nielsen/NetRatings. Second, the mainstreaming of the Internet means the market demographics are moving into Wal-Mart territory.

Since delivery is among the trickiest aspects of building an online operation, Wal-Mart may solve the issue by allowing customers to pick up their orders at neighborhood stores.

Wal-Mart's moves come as retailers across all categories are rushing to establish cyberspace storefronts. Among those building or rebuilding their e-commerce operations are Sears and Tiffany & Co.


Consultant Mr. Flickinger said Wal-Mart and other on-land retailers have a leg up on pure online players, particularly when price wars break out.

"Jeff Bezos [Amazon.com CEO] may have made a fatal decision in starting a price war," he said. "They don't have any land-based profits like Barnes & Noble to fall back on. When it comes to pricing and market expansion, Wal-Mart will win."

Maggie Gilliam, a retail analyst and president of Gilliam & Co., said Wal-Mart will also squash many upstart Web operations, perhaps putting an end to the Internet stock craze.

"All these clowns who have crazy stocks that don't make any money . . ." she said. "If they can't figure it out now before Wal-Mart is up against them, they don't have a prayer."

Contributing: Hillary Chura, Bradley Johnson, Jack Neff, Laura Petrecca, Judann

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