Click and mortar businesses have a decision to make regarding whether to setup their online sales unit as an independent unit or to run the unit as a part of its regular business division. This decision can have a significant impact on the efficiency of the online unit and is also influence by the online and overall strategy that the firm is pursuing.
A case study to understand this decision can be found in the announcment in Jan, 2010 that Walmart is establishing a new global e-commerce unit, Global.com that is responsible for online growth in both new and existing markets. The decision was driven by the strategic initiative to create a single global e-commerce platform that could be used in every global market with minor adaptation. This initiative is part of Walmart's strategy of becoming the top online retailer and overtake Amazon.com in this space.
The establishment of a separate online global e-commerce unit, allows Walmart to focus on the rapidly growing online retail market without being influenced by the brick and mortar stores that still dominates its revenues and profits. Synergies are certainly possible between online and brick and mortar stores, as demonstrated through Walmart's site to store free delivery program and the ability of customers to return items bought online at physical stores.
The Walmart Global.com business unit that focuses solely on online sales allows it to expand in markets where Walmart does not have a physical retail presence. The global e-commerce platform allows Walmart to expand its online presence with some local adaptation regarding language, product offerings, fulfillment and delivery. The online platform can be setup without consideration of how it will work with physical stores in countries where Walmart has brick and mortar operations. This allow the ideal online retail platform that is not customized and compromised in order to cater to the local brick and mortar stores. This enhanced shopping experience is essential for Walmart in order for it to catch up with Amazon.com in the online retail space.
A separate unit also allows Walmart to more easily track and monitor the performance of its online business unit and provide more accountablity for the unit in driving its own revenue and profit growth.
The independent unit also allows Walmart to establish a global online brand that is consistent with its global strategy of growth in both existing and new markets and compete with the Amazon.com brand. Independence from the brick and mortar side of Walmart's retail business provide more flexibility and opportunities for pursuing building an online brand that is not necessarily tied to the brand image of Walmart stores.
You make a good case from the seller's perspective. But how do buyers see Walmart? Is two separate divisions more likely to present the customer with two different views of the company?
ReplyDeleteExternally, the buyers would still see Walmart and Walmart.com as the same company even though they are run as independent units internally. Some cross unit cooperation will still exist, like the site to store option for delivery of online orders etc.
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