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Michael considered fate at 10:55   |   Permalink   |   Post a Comment

Well this is news to me:

Wal-Mart Stores Inc. is handing off its online DVD rental business to Netflix Inc., signaling the world's largest retailer couldn't beat the Internet upstart at its own game.
...
Despite its size and merchandising savvy, Bentonville, Ark.-based Wal-Mart couldn't overcome Netflix's head start in the rapidly expanding niche of online DVD rentals. Wal-Mart concluded the service didn't blend in well with its stores, said John Fleming, an executive vice president who oversees the company's online operations.

NPR's Marketplace had commentary (real audio) by Curt Nickish yesterday evening about how the brick and mortar behemoth couldn't beat the Internet startup at its own game. He goes on to blame it on a number of reasons but never mentions the most obvious (especially for a show called Marketplace) - Marketing! Say what you will about online versus brick and mortar companies but I think Wal-Mart's woes had more to do with the fact that I never heard of their offering! How can anyone expect to sell something if no one knows they are selling it?! I'd have about the same luck if I tried to sell my artwork behind my local Applebee's, between the dumpster and the propane tanks.

The article mentions that Wal-Mart's online DVD rental service has been around for about two years yet I've never seen a single commercial or advertisement. This is quite the opposite for Netflix, who had a marketing blitz a year or two ago. This can also be said for Wal-Mart's digital music download service (which is cheaper, by 11 cents per song, then Apple's iTunes music store). I have a sneaking suspicion that the sort of net-savvy users who are interested in renting DVDs online aren't going to think to go to Wal-Mart for all their boob-tube needs, nor are the people shopping on Walmart.com the sort of people who know what a DVD is (okay, that's harsh - and a joke - but you get my point).

I know Wal-Mart is one of the 15 largest online retailers but what they need to remember is this:

Online, everyone's store front is the same size
People shop in brick and mortar Wal-Marts because they are gigantic buildings that pop up in people's neighbourhoods over night. The low prices keep people coming back and before you know it their main street is dead and they don't even have a choice anymore. This isn't the same online. There is no premium for real estate on the World Wide Web. Anyone can buy a plot, and like the land lotteries of the 1800's they're all the same size. What Wal-Mart is falsely presuming is that people who shop in their online store already are the same people who are going to rent their DVDs or buy their digital music offerings. This is wrong. What they should really be doing is using their 10 television commercials per hour to advertise their online offerings. By association their brick and mortar stores would get advertising and people would also learn about Wal-Mart's DVD rentals, gift registries, and music downloads. This is about Mindshare(tm). They need to tell me that they have more movies and that they are offered at lower prices than Amazon.com because, unless they tell me I DON'T KNOW! For a company as gigantic as Wal-Mart and one that is clearly willing to spend oodles of cash on advertising, it blows my mind how badly they dropped the ball on this on.

Editor's Note: I hate Wal-Mart.. I actually hope they don't realize the error of their ways.