2HRS2GO: Partners won't solve real world retailers' online problems

4 min read

I hate shopping.

Don't get me wrong, I enjoy giving gifts. Nothing made me happier than my niece telling me last Christmas that I bought her the best gift she got that day.

But I hate the buying process, so I usually put if off until the last minute before Christmas. By the time I hit the stores, a lot of stuff is gone, so my choices are simpler and I can get it done faster. Works great for me.

Apparently some retailers and ISPs have the same idea. This week, with less than a fortnight left in the holiday buying season, Wal-Mart and K-Mart have apparently concluded some shopping for online partners.

Have an opinion on this?

Between the Radio Shack deal unveiled last month and today's Best Buy announcement, Microsoft (Nasdaq: MSFT) has committed $300 million for retail promotion of MSN. In the last two days Circuit City and Wal-Mart shacked up with America Online (NYSE: AOL). K-Mart (NYSE: KM) will hangs its online hat on a rack of Yahoo! (Nasdaq: YHOO) and others, including ZDNet parent Softbank.

Shares of Wal-Mart are rising today. K-Mart is up a bit after falling yesterday. And AOL is down, probably because the deals were already priced into its stock earlier when rumors began circulating last week and at the start of this one. AOL did gap up in today's opener, but the gains have since evaporated. Perhaps the market is as underwhelmed as I am.

Collusions of real and virtual worlds were inevitable, but do they really mean much? If nothing else, they might cancel each other out: "I see your Radio Shack and raise you a Circuit City. Check."

Ok, ok, so there are differences and details. Wal-Mart's package offers a Compuserve account with "featured" (whatever that means) links to Wal-Mart's online store and targeted for areas without local ISPs. K-Mart's Bluelight.com dangles the lure of a free ISP with Yahoo! content.

For Best Buy and Circuit City -- the connection between electronic devices, Microsoft software and MSN Internet service seems evident. But after all the articles and buzz this week, I'm still too dense to understand what Wal-Mart and K-Mart get out of these agreements.

Maybe I'm too skeptical, but I don't foresee many people walking into Wal-Mart to buy a toy and walking out with a Compuserve account. By the same token, why go to Bluelight.com for a free Internet access account when I can get one from AltaVista, NetZero or others? And if I am visiting Bluelight.com (or AltaVista or any other website), doesn't that mean I already have a primary form of Internet access?

I still don't know what will convince people to shop at Wal-Mart Online or K-Mart Online on a regular basis. In the online world, most of the frills offered by mall anchor stores can't be replicated (greeters and free samples on the spot), have already been copied (cheaper-than-dirt prices, broad product selection) or have no relevance (parking).

How does the lure of Compuserve build brand loyalty for these retail websites? Sure, Wal-Mart and K-Mart will get big traffic spikes as people sign up out of curiosity, but how do they keep them?

They won't with their current websites. Aside from the free ISP, Bluelight.com is as bland as, well, a typical K-Mart store. Product information is scant, promotions are dull, and the design completely uninteresting. Call it the polar opposite of a rich, layered site like Amazon.com (Nasdaq: AMZN).

Wal-Mart Online is a little better than Bluelight.com, but not much. Wal-Mart plans to launch a new version next year, so there's still hope.

Here's a tip for any physical retailer going online: give them a reason to trust you. Your physical brand means nothing once the Web surfer realizes how easy it is to find another seller. A shopper might be unable or unwilling to drive to another store in the real world, but it's not hard to click to another retail website. Offering Internet access won't change that.

Other issues:

  • CMGI
  • (Nasdaq: CMGI) In one breath, CEO David Wetherell says CMGI will be more selective about acquisitions, in the next he predicts three acquisitions a month and 120 companies total in its network a year from now.

    I wonder how much attention CMGI can possibly lavish on that many investments. The keiretsu model is supposed to provide more than just money; it offers guidance and nurturing, much as venture capital firms claim to. But 120 companies? Were I running a young Internet operation, I think I'd want to stand a little more in the portfolios of my investors.

    Even from an investor's point of view, CMGI's operations become even more difficult to parse. You'll practically be investing on faith, as opposed to knowledge of the portfolio. Perhaps that's standard practice for many Internet investors anyway. 22GO>