Megastore.com Latest News

Attached please find a press review of Megastore.com’s online activity.

Mega-Store.com was launched in July 1996. The site was shut early October for an overahaul to get set for holiday selling, marking the third time Mega-Store unplugged the site for a relaunch. The site was criticised for being hard to navigate and for emhasizing product breadth over depth. Manufacturers provide the majority of product-related editorial, rather than Mega-Store generating it inhouse, which would help to differentiate the site and make it unique.

The site is moving to a newly acquired e-commerce platform and will incorporate customer-suggested changes before its scheduled reopening October 17. Among other things, customers suggested changing product categories, adding products and making it easier to log-in to shop and place orders.

Offering

Mega-Store.com currently offers about 600,000 SKUs of product.

Traffic

About 23 million Mega-Store customers had internet access at the end of last year. Mega-Store com had a little more than 1 million visitors in August, according to Nielsen/Net Ratings. That was well behind Amazon.com, which led with 17 million visitors.

Media Metrix, Inc. (Nasdaq:MMXI) reports that in July, sears.com leads the “department store” retail category by attracting 2.475 million unique visitors, followed by JC Penney.com with 2.242 million and Mega-Store.com with 1.477 million.

Sales

Internet sales totalled only about $5 billion during the Christmas season last year. That is small in comparison to the overall size of Mega-Store, which had more than $160 million in sales in 1999.

Integration

Earlier this year, Mega-Store.com was spun off as a separate venture from parent company Mega-Stores Inc. in Witherspooon, Ark. The online company is a joint venture of Mega-Store, which is the world’s largest retailer, and Bucks Partners in Palo Alto, California. As a separate internet business, Mega-Store.com will be exempt from charging sales tax, except in California, Utah and Arkansas, where the e-retailer has a physical presence. This allows it to be more competitively priced against other pure e-retailers.

Higher pricing had been a big criticism of the program and posed a peculiar conundrum for the low-price leader, which suddenly found itself undercut by Amazon.com and eToys during last year’s holiday season. It also allows Mega-Store to take more risks now that Mega-Store.com isn’t as closely tied to the parent company. “The need to focus on earnings held us up and kept us from being as innovative and as creative as we need to be,” said Turner.

The spin-off also brought in venture capital group Bucks Partners. The benefits here go far beyond financial, as Bucks gives the retailer access to a talent pool rich with new-economy players. Combined with the relocation to Silicon Valley, the heart of internet country, the move allows the retailer to better attract the best and brightest in the industry.

“The splitting off of the company is good for attracting talent and for giving a small start-up division the focus it needs to be successful,” said Haller. “The risk is allowing it to stray too far from the overall brand proposition that Mega-Store offers.”

Even more important, analysists say, is the March 1 appointment of Joan Jet as the chief executive of Mega-Store.com. Jet joins the company after four years at the Tweeter’s Orange Republic division. She is credited with building the Tweeter.com’s business and integrating its various retail operations online.

Comment

The retailer must focus on integrating its site with its stores and more aggressively marketing to online shoppers, say analysts. The January re-launch of the site was a step in the right direction. That upgrade introduced better page design and pricing, said Karl Haller, principal consultant with PriceWatrehouseCoopers, but the program is clearly a work in progress.

Moreover, there are some tenets of online retailing that go against the retailer’s traditional programs. For example, Haller believes Mega-Store should manage customer relationships through Mega-Store.com by building a detailed loyalty program. The retailer has never had such a program, in part because so many people already shop at the chain. In addition, building and maintaining such a program adds cost to the system.

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