Wal-Mart’s online bet on its stores

By Tom Hudson

Miami Herald

When you’re the largest brick-and-mortar retailer in a world filled with more and more cyber-buyers, how do you defend your territory? By leveraging what could be your biggest liability — your stores.

In the week ahead, that’s how Wal-Mart will respond to its quick-growing competitor Amazon.

What had been a destructive price battle has turned into an all-out war for the hearts and wallets of consumers. The two retail behemoths represent the clash of shopping cultures — pursuing aisles versus surfing websites — and the business models built to support them.

Amazon’s approach involves stuffing inventory into strategically placed warehouses to avoid the cost of actual stores and using its volume to drive deals with shippers to get merchandise the last mile to consumers’ doors.

Wal-Mart, meanwhile, is saddled with the infrastructure of a different age of retailing — a network of thousands of stores, their miles of aisles and more than 100,000 products in each location.

Wal-Mart is discovering, though, that the network might actually be more of an asset than an issue.

Beginning this week, Wal-Mart will offer deep price discounts on 10,000 items shoppers are able to buy online and pick up in stores.

It’s using its size to undercut Amazon on price and hoping to use its well-spread stores as a means of reaching customers. Wal-Mart will expand the offering to 1 million items by June.

If successful, who knows: Wal-Mart stores may eventually be equal parts warehouse and retail experience.

Whatever happens, Wal-Mart shareholders can only hope the moves result in an Amazon-like stock performance. Amazon shares have gained four times more value than Wal-Mart shares over the past year.

Wal-Mart still sells more than $1 billion worth of stuff per day. That’s about four times as much revenue as Amazon. But all of Amazon’s sales are online, while only $14 billion worth of Wal-Mart’s are.

But as more buying moves online, Wal-Mart has been searching for strategies to entice its price-sensitive buyers to think of it — not Amazon — as the place to find deals in cyberspace.

Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami, where he is the vice president of news. He is the former co-anchor and managing editor of “Nightly Business Report” on public television. Follow him on Twitter @HudsonsView.