3 Strategy Mistakes by Big Online Retailers

It’s impossible to predict the future and basically that’s what strategy is. Based on historic evidence, data and outside factors, companies try to predict how the market is going to evolve and how they can best benefit from this evolution.

While strategy is rarely un-debatable and never perfectly executed, it is a very important part in evolving companies. Having a vision and the plan to achieve that vision is what makes companies such as Amazon, Walmart or Apple stay ahead of the competition.

But sometimes things go wrong and strategy mistakes happen. Here are three cases:

1. Overstock plans to develop media service, as predicted by The Onion

Overstock is one of the largest online retailers in the US. It is an Utah based retail company that has a 20 years background in commerce.

The company sells more than 1 million items on the Overstock.com web-store. The products range from home deco to jewelry to electronics to cars to insurance. Did I mention they run a pet adoption online service? And a farmer’s market?

You’ve probably guessed where I’m going with this. Focus is really not their strongest asset. The company has basically organized its strategy around the old “let’s just try everything and see what sticks” motto. This is, of course, the winning formula to tackle Amazon. This and of course Bitcoin, a surefire solution by the company’s CEO to fight the upcoming zombie revolution.

No, really, he actually said that:

“Someday, either zombies walk the Earth or something close to that[…]. Bitcoin is the solution.”

Patrick Byrne, Overstock CEO and Bitcoin Messiah. Source: Wired.

The strategy is so hilarious, Onion can predict it

Overstock’s strategy turned “un-focused” to hilarious when it announced its new media service aimed at Amazon’s Prime earlier this year. A bold move one might say, as Overstock is missing a few things called content, digital infrastructure, hardware (think about the Kindle), Amazon’s market share and media know-how. But they did get featured in the Onion a full 2 years before they’ve made the move.

2. Walmart spins off its ecommerce operation, then acquires it, then ignores it, then develops it, then makes it central. Sort of.

Make no mistake. Walmart is huge. Walmart is on top of the retail food chain (excuse the pun). It has more than 11.000 stores, in 27 countries and employs more than 2.2 million people. The company is the biggest retailer in the world with a revenue of $485 billion.

President and CEO of Wal-Mart Global eCommerce Neil Ashe

But that doesn’t mean it should be successful online, does it?

Walmart’s digital strategy is a bit … puzzling, if I may. The company’s “ecommerce” store has been online since 1996, about the same time Amazon started to grow. Unlike Amazon, Walmart.com didn’t really matter in the company strategy until 1999. That’s when the company announced the customers that no orders placed after the 14th of December could be fulfilled in due time for the holidays.

Walmart then decided to spin off that pesky thing called the online store in 2000 and transferred the operations in Silicon Valley, under a partnership with Accel Ventures. The reason, as mentioned in this throw-back article from 2002, is thatonline is “not where their customer base is”.

After an unusually horrible decision to shut down the store for a month in the fall of 2000, for a revamp, the store was just as bad as before. But it did managed to miss the 2000 holidays season due to a late re-start.

The company eventually realized the blunder and in 2001 bought back Accel’s share in the ecommerce company. Good thing they’ve realized just how important ecommerce was. It didn’t even take long to improve and redesign the webstore: just 5 years, until 2006.

Walmart was also quick to realize it can make a connection between the online and offline channels. In 2007, 11 years after it launched its online store, it launched the Site to Store program, allowing customers to order online and pick up in store.

Blunder after blunder, the company eventually realized the importance of stepping into a new era, one where customers are connected to Walmart digitally. The company has since changed its perception on ecommerce, hired talent and started experimenting with upcoming technologies.

But if there’s something worse than an un-focused strategy and a rigid strategy, that has to be … no strategy:

3. Fab.com turns from gay social networking site to daily discounter to flash sales retailer to catalogue retailer to custom furniture designer. Within 4 years.

There are very few cases where the lack of strategy and extensive investments are seen so clear within the same company. Fab is one of these rare fails. The company was founded by Jason Goldberg and Bradford Shellhammer and experimented with some pivots. Five that I know of, mentioned above.

Fab’s evolution

It went on to raise a total of $336 million and for a while it could have been the next Amazon, or Ikea, or Apple, or whatever founder Jason Goldberg thought was the fad of the day. Eventually it went on to be a huge whole in the investors’ pockets and was acquired by an undisclosed sum in march 2015.

The whole story is outlined in this cautionary tale. It could be a very funny strategy fail if it weren’t such a sad story for investors, founders, employees and in the end – the whole online retail market. Fab is the story of what could have been, if someone were to lay out a smarter strategy. Or some strategy for that matter.

Leave a Reply

Your email address will not be published. Required fields are marked *