Walmart restructures to boost e-commerce

Walmart is best known for its big-box stores, but the retail giant has positioned itself for a future where e-commerce plays a larger role by instituting management and structural changes. The company last month created a business unit called Global.com, responsible for driving online growth in the US and internationally. The unit will focus both on regions where e-commerce will operate alongside bricks-and-mortar stores and areas where there are none. Wan Ling Martello will lead Global.com as its EVP and COO. Previously, she served as CFO of Walmart International.

However, Walmart will have to proceed with caution to successfully improve its e-commerce structure, industry experts say.

A corporate behemoth like Walmart throwing more of its weight behind e-commerce is a welcome sign for the online shopping industry, says Fiona Dias, EVP of strategy and marketing at GSI Commerce.

“Any time the biggest retailer talks publicly about how important e-commerce is, it’s good news for everyone in the space,” she says.

However, Dias adds that integration of the two channels could stifle the growth potential of its e-commerce business, partially because such a large percentage of Walmart’s business occurs offline.

“Their organizational structure is tricky to pull off. They appear to have taken a cohesive group of people in San Francisco, focused entirely on growing Walmart.com USA, and broken it up to have many voices in many different places,” she says. “If your business is half online and half offline, you can be integrated and have people in charge of a particular sector, but when a merchant’s sales are closer to 99% offline and 1% is online, as Walmart’s are, more focus is going to be offline.”

Walmart said in memos released to the public that the reorganization was carried out to streamline operations and build the e-commerce side of the business. In addition to establishing Global.com, Walmart named Raul Vazquez, former CEO of Walmart.com, the EVP and president of Walmart West, one of the three geographic management regions it established in the US. Moving the company’s former head of e-commerce to lead the operations of an entire region is a step toward full integration of online and offline channels, says Zain Raj, CEO of Euro RSCG Discovery and global practice leader for retail brands at Euro RSCG Worldwide.

“Walmart is finally getting its model aligned to how customers are shopping, integrating e-commerce as part of its operations instead of a stand-alone silo,” says Raj.

Though Walmart’s online sales may never reach those of its bricks-and-mortar business, a strong e-commerce presence has ancillary benefits because consumers no longer see retail brands as only a store or Web site, Raj adds. A brand’s value is commensurate with how and when the consumer wants to use it to shop, he says.

The restructuring, and the newfound importance it places on the Web, could also help Walmart fulfill one of its 2009 goals — to become even a bigger player in consumer electronics. Pre-purchase consumer research, especially about consumer electronics products, is also a strong incentive for investing in e-commerce.

“Walmart’s focus on e-commerce is more about the massive proportion of customers who are going to research products online before buying,” Dias added. “Walmart has been strengthening its consumer electronics presence, which is a sector most people research online first.”

Mason Wiley, SVP of marketing at online ad network Hydra, notes that Walmart is behind the curve of e-commerce giants such as Amazon.com in terms of the sophistication of its Web site.

“Walmart was a bit slow, but can recover quickly. Success is sometimes the worst enemy of innovation,” he said. “By making this move, they’ve proven they’re looking to future and that they’re willing to develop the channel, and going forward they will probably devote big resources to its success.”

Requests for comment to Walmart were not returned in time for publication.