Wal-Mart Wakes Up To Life On The Web

Although self-described “skeptical” analysts hedge that a Wal-Mart.com IPO is still uncertain, the company’s recent announcement of an $60 million equity contribution from Accel Partners definitely increases the likelihood of a public offering.

“There is a lot of hype surrounding all of this,” commented a retail analyst with Standard & Poor’s Equity Group. “As a venture capital company [Accel] wants an exit strategy, and an IPO is one [option].” Accel, which has participated in 131 equity rounds since Jan. 1, 1999, saw 12 of its portfolio companies travel the pipeline last year. Highlights include offerings from Foundry Networks, Interwoven, Agile Software and Redback Networks. The dozen issues are a combined 387.44% above offering price, according to Venture Economics, which likely gives the retailer confidence that Accel knows how to pick winners.

Wal-Mart, like many mortar-based retailers, has taken a circuitous path to the Web. Although its original site was launched in 1996, the company planned a retooled online destination last October, just in time to cash in on the Holiday retail cycle. But according to analysts who made it to Bentonville, Ark., for the unveiling, the company demurred, announcing it would continue internal and limited external testing programs, pushing back the relaunch until Jan. 1, 2000.

“They must’ve learned some things, that they needed more money and more testing to really get it right,” the analyst continued. Cognizant of the fulfillment bugs Toysrus.com experienced during the holidays, Wal-Mart.com intends to farm out part of its fulfillment operations to FingerHut Inc. It’s an alliance that wins kudos from analysts.

“A lot of customers got burned last Christmas because of non-fulfillment,” said Ulysses Yannas, a retail analyst for Buckman, Buckman & Reid. “The problem is once you get burned, you will think twice about coming back.”

Matching Competition

Mirroring the partnership between Yahoo Inc., Softbank AG and Kmart Inc., which created Bluelight.com late last year, Wal-Mart has forged a relationship with America Online Inc. to provide Internet access to underserved communities within its coverage area. According to the company one-third of its markets do not have Web access. Users will be able to select AOLs latest software offering, or opt for a co-branded and as yet unpriced product, which will use the Wal-Mart.com site as its start page.

The dilatory approach of established brands like Kmart and Wal-Mart has allowed relative newborns, Amazon.com and Etoys among them, to mature into de facto standards for online shopping. But analysts agree that as accepted names, like Kmart, Wal-Mart and ToysRUs align their ducks, the online marketplace is going to turn into a barrel shoot.

“There are more players coming,” said the S&P analyst. “And some of them are heavy hitters with deep pockets. Their names really mean something with customers.”