Discount retailers spin a web of their own

It may have taken them a few trips to the dressing room, but Kmart, Target and Wal-Mart Stores are - finally - all dressed up and ready to show that they've got what it takes to court their share of attention at this year's online holiday shopping dance.

In the past month, the Big Three discounters have unveiled redesigned Web sites as part of their first serious campaign to capture online holiday sales. Although it's taken these companies a few years to get their online acts together, analysts seem to feel this is the year they will finally click with consumers.

And that's expected to put extra pressure on their dot-com rivals, many of which - like first-mover Amazon - have had the playing field mostly to themselves.

"These guys are everywhere. Sooner or later, you find yourselves in one of their stores," said Cameron Meierhoefer, an Internet analyst at PC Data, in reference to the Big Three's new moves. "We're really talking about the ability of Amazon.com and Buy.com to stay afloat."

It's a sign of how e-commerce is changing. About 51 percent of American households are expected to go online this holiday season, up from 45 percent last year, according to Jupiter Research. Many of those shoppers are new to the Web and alarmed by stories of fraud, botched deliveries and dot-com failures, so they're looking for brand names they know, analysts said.

The veteran discounters plan to press their formidable advantages on the Internet, using their size, their networks of hundreds of stores, their buying power and their name recognition to dominate the thin-margin, high-volume business.

After three years with little traffic to show for it, "Walmart.com, in its latest rebranding, decided to go whole hog," Meierhoefer said.

The joint venture between Wal-Mart and Accel Partners launched a new site as it switched to a faster platform acquired with its purchase of Homestore.com this summer.

The makeover reorganized the shopping categories to make the site cleaner and faster to navigate. It also shed several inexpensive impulse items it used to display just before checkout, but the site still sells more than 500,000 products.

BlueLight.com, a joint venture between Kmart and Softbank, carries 240,000 items, up from 90,000 in the summer. It wants to offer both a range of commodity goods, such as books and music, and more select brand-name items, such as Martha Stewart ceramic dinnerware.

Target.com, a division of Target, also switched to a new platform, created by Art Technology Group, this summer. It expects higher traffic, but lists only 15,000 items.

Rather than try to fight promotional wars over low-margin goods, it chose to keep a narrow focus on different goods, said Cathy David, general manager at Target.com. Among its offerings are high-margin and trendy items such as Michael Graves tea kettles and peridot jewelry.

All three are playing to the season, hoping to leverage their offline connections by accepting returns in their brick-and-mortar stores. They also hope to persuade customers to buy across categories and save on shipping in toys, books and music, three of the top retail categories on the Web, said Jupiter analyst Heather Dougherty.

Price remains one of the most decisive factors in several Internet retail categories, analysts said.

"The truth of the matter is an Amazon.com does not have the buying power of a Wal-Mart," said Rob Labatt, an analyst at GartnerGroup.

Forrester Research analyst Seema Williams said, "Dot-coms can do almost nothing to defend themselves" against hardball tactics such as those, so dot-coms have to shift the battle to other areas.

"They will have to focus on depth of inventory. They also have to offer better shopping tools and a better shopping experience." Experience can outwit money here, she said, as Amazon has proven with its 25 million customers.

The discounters also face some disadvantages trying to move onto the Internet. "A large part of their target market doesn't use the Internet," Meierhoefer said. And when they do, consumers expect the Web site to "feel" like the store.

"In order to make it seamless, it takes a lot more work," Target.com's David acknowledged. This is key, because retailers believe it's profitable to use the Web sites to send customers back into the stores. Such "multichannel" customers spend more money than store-only customers.

And with dot-coms disappearing because they lack the cash to continue funding their as-yet unprofitable operations, BlueLight, Target.com and Walmart.com - with help from their well-capitalized parents - may win the online door prize merely by being among the only ones left dancing when the party ends.