2 More Retailers in Net Access Deals

Wal-Mart, the world’s largest retailer, said Thursday that it will enter the Internet service provider business in a pact with America Online, bringing cheap Internet access to rural communities where the retail chain got its start.

Also on Thursday, Microsoft Corp. announced an alliance with retailer Best Buy Co. that gives Microsoft a place in the retailer’s stores and Best Buy a spot on Microsoft Web pages. Microsoft is making a $200- million investment in Best Buy.

The two deals are just the latest examples of new partnerships between Web-focused companies and large retail chain stores, in the name of expanding their reach both online and offline.

On Wednesday, Kmart Corp. said it would create a free ISP with Yahoo Inc. and Circuit City Stores Inc. announced a joint-promotion agreement with AOL. Last month, Microsoft made its first foray into chain stores, announcing it would open in-store boutiques in Tandy Corp.’s Radio Shack stores to bolster the company’s subscriber base.

More partnerships are expected as online companies look for ways to reach new customers and advertise their services. Retailers, meanwhile, want technological partners to help them expand their Web presence.

Speculation all week had focused on Wal-Mart and the likelihood of a deal with AOL. Like the Yahoo-Kmart plan, the Wal-Mart Stores Inc. deal with AOL will create an ISP carrying the names of both companies as well as including cross-promotion. Wal-Mart and AOL also said they will jointly develop and sell interactive products, such as AOL TV.

The companies declined to release the name of the service or how much it would cost.

AOL and Wal-Mart also said that they would work together to expand local Internet access in smaller communities where it is not available, such as working with the phone companies to bring toll-free service into such areas. Wal-Mart said that only six of every 10 towns where it operates stores have local Internet access.

Wal-Mart stores will distribute new software that will enable customers to locally access and create online accounts. The stores will also offer AOL software that will have quick links to the Wal-Mart shopping site.

“Millions of our customers will be enabled by this agreement to obtain affordable, convenient Internet service, and to access our online store,” Wal-Mart’s vice chairman and chief operating officer, Lee Scott, said in a news release. “The combination of Wal-Mart’s affordable online offerings and AOL’s reach to more than 19 million households represents a significant opportunity for value-conscious Americans.”

AOL will promote Wal-Mart’s redesigned Web site, Walmart.com, in the shopping area of its site. The revamped Walmart.com is expected to launch on Jan. 1.

“Wal-Mart’s announcement is constructive, and I view it positively, but it essentially gets them to where they should have been already,” said Dan Binder, an analyst with Brown Bros. Harriman in New York. “I don’t think it’s going to have a significant impact on their financials over the next year or two years.”

Wal-Mart’s announcement is a signal to customers and investors that the company that was slow to the electronic party intends to fight for a piece of the online business. Wal-Mart has lagged online behind real-world competitors such as JCPenney and Dayton Hudson’s Target, delaying the launch of its site, offering a truncated version.

The announcement also grants Wal-Mart increased credibility. On its own, by the second week of December, Wal-Mart’s online store was slipping in a manner that would be unthinkable in its real-world counterpart: falling behind other retailers in crucial service points. The site’s home page warned that it could no longer guarantee merchandise delivery in time for Christmas.

“Wal-Mart is positioning themselves today to ensure they are there to serve the customer if online retailing becomes an important part of shopping,” said Asma Usmani, a retail analyst with St. Louis investment firm Edward Jones. “Today, you don’t see the retail pie growing; it’s about capturing market share within the pie.”