Conventional wisdom holds that to succeed in electronic commerce, you have to get in early. But in late 1999, Walmart decided to challenge that most sacred of web rules. After several years of tinkering with its website, watching while others broke new Internet ground, the retailing giant was ready to flex some cyber muscle. Up to that point, Walmart.com had realized modest success online, ranking 43rd among Internet shopping sites. It trailed web pioneers like eBay and Buy.com. In May 1999, Amazon.com greeted almost 10 million online visitors; Walmart.com saw only 801,000. For 1999, analysts expected Walmart's e-commerce activities to produce sales of less than $50 million out of the company's total sales of $157 billion.

Walmart faced increasing direct competition from Amazon.com. In July 1999, Amazon announced its expansion from books, music, and videos into toys and consumer electronics. Walmart already was a powerhouse in these product categories through its traditional stores. It announced that it would offer products from all 25 categories carried in a typical Walmart discount store. Moreover, it expected to offer a broader array of higher-priced items than its traditional stores-for instance, DVD players and digital cameras. It also enabled customers to return products ordered online to any of Walmart's 2,451 U.S. discount stores. Like Amazon, it planned to provide tailored online specials to match the shopping habits of its repeat customers.

The company announced plans to expand its online store offerings before the end of 1999 to match more closely the breadth of its traditional outlets. To facilitate this expansion, Walmart penned deals with Fingerhut Business Services and Books-a-Million. Both had expertise in distributing individual orders directly to customers' homes- quite a different set of skills from bulk shipments, which had been Walmart's forte.

Demographic shifts occurring in cyberspace offered the potential to help Walmart. Back in 1999 Jupiter Communication projected e-retailing to grow from approximately $12 billion in 1999 to an estimated $41 billion in 2002. Much of this expansion would be concentrated in Walmart's existing lower- and middle-class customer base. Jupiter analyst Kenneth R. Gasser noted, "Internet users are increasingly coming to resemble the population at large."

By 2005,Walmart.com had logged $1 billion of Internet sales. However, the world's largest retailer only ranked about 13th in Internet sales while Amazon.com had sales of over $10 billion. About 500 million total visitors clicked onWalmart.com in 2005, and the company predicted this to increase to 700 million in 2006. But, its online sales still only accounted for about 1 percent ofWalmart's annual sales.

In January 2007, Walmart.com launched Soundcheck, an original series of musical performances that feature punk pop and rock bands to increase its digital music offerings. In March 2007, Walmart.com announced "Site to Store" where Walmart.com shoppers can purchase online and have orders delivered to their local store for free. By July, Site to Store sales more than doubled since its March rollout, and about 90 percent of participating stores had at least one Site to Store order within the first 48 hours of service activation. In January 2008, only 11 months after initiating its movie download service, Walmart.com quietly dropped this service because Hewlett-Packard Co. stopped providing the application that allowed shoppers to purchase and download videos such as movies and TV shows.

Placing yourself back in 1999, answer the following questions in a well-developed discussion:
1. What is the impact of Walmart.com on customer-borne transaction costs?
2. Do you think that Walmart.com is likely to create additional value?
3. Is it likely that Walmart will capture any value created by Walmart.com?
4. Should Walmart have pursued e-commerce more aggressively sooner?
5. What do you think the potential impact of Walmart.com will be on the company's efforts to expand internationally?