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Eying Amazon, Wal-Mart Expands E-Commerce

The nation's larger retailer opened up its e-commerce Web site with the launch of Wal-Mart Stores' Walmart Marketplace, a new program that allows third-party sellers to offer additional products to online customers.

Walmart.com's (NYSE: WMT) new e-commerce service means nearly 1 million new items have been added to its inventory in categories including home, baby, apparel, toys and sporting goods and memorabilia, according to the company. Retailers participating in the new Walmart Marketplace include CSN Stores, eBags.com and Pro Team.

Walmart.com said it chose these specific retailers based on their strong customer service track records and large assortments of quality brands and products, and will continue to grow the Walmart Marketplace by adding more retailers over the next year.

"We've added nearly one million new items to our online assortment with the introduction of Walmart Marketplace, making it even easier for customers to find more of what they want when shopping Walmart.com," Kerry Cooper, Walmart.com's chief marketing officer, said in a statement. "Working with select retailers, known for their strong customer service and large online assortments of new merchandise, gives our customer more reasons to choose Walmart.com when shopping online."

All purchases from a Walmart Marketplace retailer are managed through Walmart.com's checkout process. The Walmart Marketplace retailer will then manage and support the order, including shipping and handling, customer service, exchanges and returns.

The move signals the potential for new competition for online e-commerce stalwarts Amazon (NASDAQ: AMZN) and eBay (NASDAQ: EBAY), both of which are trying to maintain healthy online sales as the dour economy negatively impacts the market.

Recent findings from researcher comScore reported that e-commerce sales continue to suffer, with online retail spending pegged at $30.2 billion -- down 1 percent compared to a year ago, making it only the second quarter on record where e-commerce spending has been lower than the same quarter the previous year.

In July, Amazon had 66 million unique visitors, behind eBay's 73 million, while Walmart's site realized 33.1 million, according to comScore's monthly analysis of U.S. Web activity at the top online properties for July 2009.

Despite the entrenched competition and the blistering market conditions, experts say Wal-Mart's move could pay off.

"Walmart Marketplace should do very well. They already get a lot of site traffic and if they can capture some incremental revenue from these third parties, that is extremely profitable business for them, and it positions them well against Amazon," Sucharita Mulupuru, e-commerce analyst with Forrester, told InternetNews.com. "I don't think they'll displace Amazon any time soon, if ever, but it gives them a good shot of increasing their overall Web penetration. Amazon's value proposition until now has been a broad assortment. This enables Walmart to compete with other companies with big assortments."

She added that the business model is a sound approach for Wal-Mart Stores' online efforts.

"I like the notion of partnering with other Web sites -- it makes much more sense than extending the drop ship model. This lets them get a shortcut around fulfillment excellence -- that's the biggest challenge with drop ship-difficulty in maintaining quality control of shipments," she said.