On Sale at Walmart.com: Pink Slips

The company says a 10% layoff signals a shift in marketing strategies, not a loss of faith in the business

With many pure-play dot-com retailers falling by the wayside, even a bricks-and-clicks giant like Walmart.com isn't immune to the shakeout. CEO Jeanne P. Jackson told BusinessWeek Online on Feb. 27 that the company plans to lay off 24 people -- about 10% of its workforce -- as it adjusts to what customers want to buy on the Web.

Since redesigning its site before Christmas, Walmart.com, partly owned by venture capitalists Accel Partners, has succeeded in boosting traffic. The site was one of the most popular online destinations for holiday shoppers and ranked No. 1 in January in the retail department-store category, with 3.6 million unique visitors, according to Jupiter Media Metrix.

Jackson, former CEO of Banana Republic, insists the layoffs are "in no way any indication of our lack of faith in the business. We are very committed to the fact that we're building something good for the long haul that is going to bridge back to the stores."

HIRING ELSEWHERE.

  What the Brisbane (Calif.)-based company, which is 80% owned by Wal-Mart Stores Inc., has learned is that customers don't want to buy certain goods online, especially small-ticket items in the baby, apparel, and beauty-products categories, where shipping charges represent a large percentage of the total cost. As a result, Walmart.com will need fewer marketing and merchandising employees in those areas. "It's just smart business not to invest in unprofitable lines of business," Jackson says. At the same time, she notes that Walmart.com is beefing up its ranks in such areas as engineering and site design, with some 30 employees hired over the last eight weeks.

Jackson remains upbeat. She says she's happy with the overall level of visitors and buyers. The strong holiday traffic "just showed the strength of the brand. We're very pleased with customer response," she says, insisting that the company's investment plans to develop the business aren't changing. "We're still very committed to the business," she says.

David M. Cooperstein, research director at Forrester Research, speculates that Walmart.com might be preparing to be folded back into the parent company in Bentonville, Ark. If that happens, the site wouldn't need as many marketing and merchandising people. "It makes more sense to be an integrated whole," says Cooperstein. A Walmart.com spokeswoman says the company has no such plans. Whether it is integrated back into the mother ship or not, Walmart.com, like so many others, is learning the painful lessons of the Web.

By Wendy Zellner in Dallas

Edited by Douglas Harbrecht

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