Walmart.com, the online arm of the world’s largest retailer, said Tuesday that it has laid off 24 employees, or about 10 per cent of its workforce, as it cut operations that weren’t effective on the Internet.
The layoffs are only the latest in a string of e-commerce missteps for Wal-Mart, whose online operations are now in their third incarnation and have failed to live up to the company’s reputation for retailing prowess.
Walmart.com executives said they decided to cut merchandising operations in product categories that were not successful on the Web during the holiday season – the first key buying season for Walmart.com under its current management.
“Once we got through the holidays, we had enough data to understand what customers responded to and what they didn’t respond to,” said Jeanne Jackson, chief executive officer (CEO) of Walmart.com. The company found that there were several categories of goods that are traditional hits at Wal-Mart’s stores -from underwear and socks to votive candles – that failed to sell online. “The price is too low for the customer to pay shipping,” Jackson said.
The company also cut some of its online marketing operations. “Internet advertising prices have not come down that much, and it is still a cost-ineffective way to attract customers,” Jackson said. Instead, the company will rely more on the brick-and-mortar stores of its parent, which are visited by an average of 90 million customers a week, to drive shoppers to its site.
But Jackson insisted that she remains bullish about the company’s prospects. “This is not about a retrenching of the business,” Jackson said. Walmart.com is actively trying to fill 52 positions, mostly in areas like Web site design, product management and engineering, she said. “I wish I could take someone with buying skills and teach them Java script overnight.”
In addition to the layoffs, an undisclosed number of employees were re-deployed in new jobs.
Analysts say the cuts indicate that Walmart.com is being run with the same dogged and ruthless attention to the bottom line that has been the company’s hallmark throughout its 38-year history. “Everyone has to be prudent in light of the current market environment,” said Jeetil Patel, an analyst with Deutsche Banc Alex. Brown.
Although job cuts at online retailers have become routine during the past year, these are the first significant layoffs at the Internet operations of a major offline chain. “That is probably an indication of more to come,” Patel said.
Wal-Mart, along with VC firm Accel Partners, made a US$100 million investment in Walmart.com in January of 2000, spinning off the company into an independent entity. Shortly after, they hired Jackson, an executive at the Gap (GPS), who had been in charge of the clothing retailer’s Internet operations.
Jackson says she plans to continue focusing on making the company’s Web site easy to use, streamlining product searches and checkout procedures. Most analysts say Walmart.com’s site still pales in comparison to that of competitors like Amazon.com (AMZN). Jackson also said Walmart.com plans to launch a joint Internet service with AOL in the second half of this year, more than a year behind schedule.