Online Department Store Industry Lau, Hee-hang Li, Rui Montet, Francis Nagarajan, Sainath

Major Online Department Stores Traditional Department Stores: Macy’s Neiman Marcus Nordstrom Bloomingdale’s Sears Kohl’s May (Kaufmann’s, Hecht’s) JC Penney Discount Stores: K-Mart Wal Mart Target Ames Potential Competitors: Specific Stores: CompUsa, BestBuy Online Stores: Buy.com, Shopping.com, Yahoo!shopping

Overview KMART Browse + Select Items and add to Shopping Cart Enter Shipping and Billing Information FREE Delivery SEARS Search + Compare Items Contact: Online / Toll Free / Nearest Store Delivery to certain areas (based on ZIP code) WALMART Search + Compare Items and add to Shopping Cart Checkout OR Speedy Checkout (MyWalmart)

Sample Front Page – Walmart, Sears

Signup Page - MyWalmart

Shopping Menu

Customer Profile Who are the customers –JC PENNEY: The 2 out of 5 most important segments “Starting Out with JCPenney - between 18 and 35 years old; usually single, or young families with no more than one child” (19%) “Modern Spenders - between 35 and 54 years old; most often they are married with up to two children” (27%) “The median annual household income of these targeted customer segments is $48,000.” Source:

Customer Profile Who are the customers –KMART: Consumers looking for “price, quality, service, product mix and convenience” Source: KMART Corp., 10K, April 1999 –SEARS: Customers looking for “competitive price and strong assortment of national brands complemented with outstanding proprietary brands …throughout all stages of their lives via any delivery channel they select” Source: SEARS ROEBUCK & Co., 10K, March 1999 –WALMART: Customers looking for “low prices on quality merchandise that offers exceptional value.” Source: Wal Mart Stores Inc., 10K, April % of customers are women

Customer Acquisition How they attract customers –Strategic Marketing Alliance with ISPs: Getting them to the front door! WALMART + AOL Marketing Alliance –Money Back Offer ($5 KMART Cash Card for each item  Store) –Free Shipping (KMART) –Affiliation with Web Portals (KMART-Yahoo!, Macys-Yahoo!, mall.com, Ames-Excite) –School Programs (JC Penney  $30 m to JCPenney CAN DO Afterschool) (Target  Take Charge of Education $18 m) –Broadcast Advertising (Most) –Direct Mail (JC Penney) –Referrals (KMART’s “Tell a Friend”) –Digital Postcards (Bloomingdales, Ames) –Shopping Spree Sweepstakes (SEARS, Bloomingdales)

Value Proposition Value Added Relationships –STRATEGIC Value: The Walmart-AOL Marketing Alliance Value for AOL: new segments of mass market Value for Walmart: greater success for the site. New AOL 5.0 for Walmart customers will have automatic access to the Walmart site. Value for Walmart Customer: Sense of security and identification with trusted brand name. Signaling. Value Added Features Checking Order Status Online (TARGET) “a high level of customer service, excellent credit offerings, installation and service.” ( SEARS ROEBUCK & Co.) Online Shopping Assistants (SEARS) Multilingual (Neiman Marcus – Japanese, Bay - French) Multiple Ship To Addresses (Neiman Marcus – handled offline)

Value Proposition Additional Value Added Features –Match Lowest Competitor Price (WALMART) –Rollback Prices (WALMART) –Travel Services (Target, WALMART) –True Internet Color (Bloomingdales – for garments) –Clubs for Special Occasions (TARGET “Club Wedd” for weddings) –Online Photo Center (WALMART) Store, Share, Download, Print $0.86/copy), Save, , Gift Printing –Wish List, Reminder List, Gift Registry, Purchase History (MyWalmart, JC Penney, SEARS) –Store and Allied Services Locator (WALMART-Pizza Hut) –Free Internet Access, Webpage, (KMART-Bluelight) –Horoscope (Neiman Marcus) –Personalized Tailoring (Neiman Marcus – “Pick-Me-Up”)

Price Comparison Sample prices –Fisher-Price© Activity Dome TARGET –Unit Price $49.99 –Standard Shipping(7-10)$ 8.95 –Rush Shipping(4)$13.95 –Express(1-2)$21.45 WALMART –Unit Price$49.96 –Standard Shipping(5-8)$ $0.97 per item –Premium Shipping (3-5)$ $2.47 per item –Express Shipping (2-3) $ $5.97 per item FISHER-PRICE.com –Item NOT Available Jeannies Kids Club on Yahoo! Shopping –List Price$35.99 –Shipping (calculated)$ lbs.) –Standard Shipping Rates$ 0.70 cents per pound + $4.95 packing and handling –Express Delivery Rates$20.00 added to Standard for Next Day Air $10.00 added to Standard for 2 nd Day Blue

Customer Experience Product Satisfaction –Returns at Brick and Mortar Store (Most) Channel Management –Online store and catalog complement each other (JC Penney) Order catalog online Shop from a catalog – enter item number online

Repeat Business Turning one-shot customers into repeat customers –MyWalmart: Increases stickiness Captures personal information, payment options, billing information and customer preferences Reduces transaction cost – updates and special offers for registered customers (KMART, SEARS, JC Penney) –Online logistics support. E.g. online repair scheduling and parts ordering (SEARS) –$5 KMART cash card for each item ordered –Focus on private brands to build customer loyalty and encourage repeat purchases (JC Penney)