Byline: Kristin Young

LOS ANGELES — Will the fourth try be a charm for
Web watchers should start to get a feel for that possibility next week, with now gearing up to relaunch on Nov. 1, in time to capture a solid share of holiday business, WWD has learned.
The Palo Alto-based discount e-tailer, which operates as a separate entity from its majority owner, Bentonville, Ark.-based Wal-Mart Stores Inc., shocked Internet observers by shutting down on Oct. 1 for an overhaul at the beginning of the year’s busiest shopping season.
That move sent up a red flag, one that many observers saw as a signal that the Web site’s problems are quite serious and massive structural changes are afoot. Most often, problems at an e-commerce site are fully or largely addressed while that destination continues to operate, much as brick-and-mortar stores undertaking a remodeling project aim to stay open as long as they can during the process.
“Very rarely does an e-tailer bring the site down for maintenance reasons for this long,” said Seema Williams, a senior analyst at Forrester Research Inc., in Cambridge, Mass. “They [] can do plenty wrong, but they have the power to fix it.” She pointed out that the changes now under way could range from a revamping of’s content-management systems to updating the Web site’s architecture or tying into the Wal-Mart Store’s legacy customer databases.
While it’s unusual to go dark while fixing Web site snafus, Internet observers acknowledged it’s still better for to lose out on sales transactions in October than to risk missing the big business in November and/or December altogether. Last year, in its survey of 60 e-tail sites on the Friday after Thanksgiving, Credit Suisse First Boston found that it was unable to purchase a coffeemaker at — the Web site’s customer service reps also could not execute the order, despite trying to do so for an hour. At that time, cited “high customer traffic” and said it couldn’t handle the order over the phone either, due to “complications.” The Web site wound up posting a disclaimer stating it could not guarantee delivery of merchandise before Christmas 1999 and acknowledged it was working to streamline distribution efforts, as well as to make easier to navigate.
The Web site’s relaunch this Feb-ruary failed to impress customers or Internet observers. And in July, when purchased the technology assets of, a San Mateo, Calif.-based e-tailer that has ceased operations, it appeared to Web watchers that was starting from scratch. Many members of the defunct e-tailer’s engineering and design teams joined the staff, and analysts said the deal suggested that did not have technology platforms worth carrying forward.
Apparently, the purchase of technology assets was not a quick fix. “I understand that the fulfillment-capacity acquisition of didn’t work well on the performance side or on the user side,” said David Schatsky, research director at Jupiter Research.
Indeed, said it is doing some pretty heavy virtual lifting: It is currently in the process of moving its database to a new technology platform it acquired from in July, according to a spokeswoman.
“Rather than doing it a piece at a time, this was a decision to insure the whole thing will be a faster, easier- to-use, more reliable operation,” said Cynthia Lin, the representative. “We’re taking the time to move the information, check the Web site’s functionality and check it again to insure reliability.”
Jeanne Jackson, former chief executive officer of Banana Republic who signed on as ceo of in March, declined to be interviewed for this story. But at a meeting with retail analysts held Oct. 2 by Wal-Mart Stores in Springdale, Ark., Jackson enumerated various reasons the e-tailer is placing a high priority on getting the Web site to function more effectively, according to a tape recording of her presentation to the analysts that was obtained by WWD. “With the corrections that are occurring in the marketplace, it really is a good time to step back and think about the reasons we’re in this business,” she said in the half-hour presentation. In addition, she cited a handful of reasons why is pouring so much time and effort into redeveloping its e-commerce initiative:
It matters to the customer. Nearly 80 percent of the U.S. population is expected be online by 2004, according to company research, and Internet technology will dramatically affect how Wal-Mart’s customer buys goods.
It is capable of communicating more product information to the consumer than traditional retail channels and off-line spending is increasingly influenced by online research: Internet consultant Jupiter Research is projecting the Internet will drive eight times as much dollar volume off-line this year as it does online.
It affords an opportunity to expand customer relationships. E-commerce could boost sales in urban areas such as San Francisco and New York City, for example, where Wal-Mart does not have brick-and-mortar stores.
It heightens the customer’s awareness of the Wal-Mart nameplate.
“Consumer behavior is going to change and we’ve got to play,” Jackson acknowledged to the group.
During her presentation, the ceo said there are five goals for the Web site: to improve its focus on the customer, insure reliability, make navigation easier, fine-tune the product assortment and all the while sticking to Wal-Mart’s everyday-low-price standard. plans to measure the success of those goals, Jackson said, by closely monitoring the Web site’s reliability: It will assess the e-tail site’s speed, shipping reliability, credit processing, order status tracking and gift return options. is also eliminating items from assortment that don’t lend themselves to online transactions, such as nail polish remover or 19-cent pens that had previously been sold on the Web site.
“We’ve been busy,” Jackson said, “but we’ve still got a lot to do.” has also made the decision to keep control of its own fulfillment. It is currently constructing its first fulfillment facility in Carrolton, Ga. In the meantime, will be using a Fingerhut facility in Utah and an Airborne facility in Ohio to deliver orders and managers and employees will be at both sites at all times during the critical holiday period, according to Jackson’s presentation. spokeswoman Lin said the e-tailer will continue to use third-party services on an as-needed basis after it finishes building its own distribution center.
Fingerhut officials said Friday that had recently negotiated a contract for two more years with Fingerhut’s business services unit. If were to back out of that agreement, a spokesman for Fingerhut said, “It would not break the bank.” In disclosing on Oct. 13 its plans to drastically downsize its Fingerhut subsidiary, Federated Department Stores said it will de-emphasize nonretailing activities, such as business-to-business fulfillment services.
As for the look of the newly relaunched Web site, Jackson said users shouldn’t expect to find Flash technology or leading-edge applications. There will be no virtual dressing rooms, for instance. The Web site’s new look has been inspired by Wal-Mart’s supercenters, which feature wide aisles, bright lights and clear signage. The new homepage will offer a Web site directory, set off by a clean, white background.
“It is very straightforward,” Jackson added, noting a greater priority has been placed on functionality than style. “It’s very clean. There are not a ton of pretty graphics. You will know in three clicks exactly how to buy a scooter in the toy department.”
In the view of at least one Internet observer, it’s very late in the holiday game for’s makeover gambit. “This is absolutely too late to make draconian changes to the site,” said Ken Cassar, a senior digital commerce analyst at Jupiter. “If had to make substantial changes to the site, it should have been done back in the second quarter. Everything could go well, but with the holidays, you really don’t want to take any chances.”
Even if things do go well for in November and December, some analysts believe the e-commerce site will end up having a modest impact on this year’s holiday selling season on the Internet, which Jupiter estimates will pull in sales of $11.6 billion in the U.S.
“In all honesty, the main concern for Wal-Mart investors is [the Web site’s performance] much farther down the road,” said Bill Dreher, a research analyst at Robertson Stephens. Dreher estimates more than $100 million has been invested in the Web site and predicts the online business is shaving about a penny per share off of the annual earnings produced by Wal-Mart’s 4,000 brick-and-mortar stores.
However, Dreher noted is a major presence on the Web and one that cannot be discounted. “In five years, [] will be another growth vehicle and there will be tremendous synergies between it and the bricks-and-mortar offerings,” he projected. And despite its numerous problems, has drawn strong customer traffic: It placed sixth in August among Web sites mounted by apparel merchants, pulling in 1.6 million people, compared with the 2.9 million who visited, 2.2 million who went to Kmart-controlled and the 1.9 million who shopped spokeswoman Lin conceded that the company’s expectations for the holiday selling season are modest. “The site has always been a journey, not a race,” she said. “We’re not looking to have the largest number of customers for the holidays but we are focusing on having the happiest.”

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