Wal-Mart Turns to the Web ... Again

In the past couple of months, Wal-Mart (NYSE: WMT  ) has seriously upped its efforts to expand its online initiatives and take advantage of the boom in social media. The recent acquisition of social-media group Kosmix, coupled with its fresh online grocery delivery system, has signaled its intent -- loud and clear – to start dominating the digital landscape.

Wal-Mart ready to go
Retailers have used the Web to help boost in-store sales for a while now. Wal-Mart is doing its best to make the optimum use of this medium as well. It recently started testing an online grocery delivery service called Wal-Mart to Go. This program allows you to go online and select daily household and food products, add them to your cart, and then have the world's largest retailer deliver them to your doorstep.  

This move adds to Wal-Mart's nationwide Pick-up-Today offer, which was launched nationally last month. In this program, you have to go to the store to pick up the selected items. Are these moves beginning to remind anyone of another big digital retailer?

Online sales: the good and the bad
The Wal-Mart to Go program is being tested first in San Jose, Calif., and has effectively been built to take on other online retailers such as Amazon.com (Nasdaq: AMZN  ) , which sells groceries online through a program called AmazonFresh.

This is yet another effort by Wal-Mart to help rectify seven straight quarters of declining U.S. same-store sales, even as retailers such as Costco (Nasdaq: COST  ) and Target (NYSE: TGT  ) give the Bentonville Behemoth a real run for its money.

Wal-Mart remained mum on the prospects of this program, its intended scale, and what it hopes to achieve with it. But this initiative may turn out to be fruitful for Wal-Mart in the long run, and looking at the popularity of online shopping sites such as Amazon and eBay (Nasdaq: EBAY  ) , the advent of this program is definitely promising.

One major disadvantage in delivering is the rising cost of gas. If Wal-Mart can figure out an efficient way to deliver goods to consumers at a minimal cost, the program could be hugely beneficial. The company is notorious for its brilliant supply chain management and logistics, so it may find a competitive advantage here. I reckon it's a wait-and-watch game, to see how the test store performs and then see what steps to take.

Similar programs
This is not the first time grocers have resorted to online retailing. Grocers such as Safeway (NYSE: SWY  ) have similar services in place. Online grocer FreshDirect has enjoyed considerable success, with its revenues growing by almost 20% yearly.

Not everyone has embraced online retailing with open arms, though. SUPERVALU (NYSE: SVU  ) stopped offering home delivery a couple of years back, preferring customers to visit its stores instead. And, of course, who can forget perhaps the biggest dot-com fiasco ever, when Webvan, an online grocery delivery system, went bankrupt. Wal-Mart should learn from others' mistakes and move forward.

The Foolish bottom line
Wal-Mart has taken another positive step to get back on track after some disappointing quarters. For now, as an investor, I'd say it's best to wait for the results of this test store.

Shubh Datta doesn't own shares of any of the companies mentioned in the article. Costco and Wal-Mart are Motley Fool Inside Value selections. Amazon.com, Costco, and eBay are Stock Advisor recommendations. Wal-Mart is a Global Gains pick. Wal-Mart is an Income Investor recommendation. Motley Fool Options has recommended buying calls on SUPERVALU. Motley Fool Options has recommended a diagonal call position on Wal-Mart. The Fool owns shares of Costco, SUPERVALU, and Wal-Mart. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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