Wal-Mart Finds Ally in Education

What promises to be a lucrative arrangement between the country’s largest retailer and an education company based in West Virginia started with an unsolicited e-mail message in October.

The retailer, Wal-Mart Stores, was looking for a partner to offer online college courses to its work force in the United States. Might American Public Education — which runs two Web-based universities — be interested?

By January, American Public put together a team devoted to landing the Wal-Mart contract, and last week, the two companies announced an agreement. Wal-Mart committed to spending $50 million over the next three years in tuition and other assistance for employees who enroll.

Since then, shares in the $850 million education company, which started 19 years ago as a provider of classes to military personnel and now offers degrees in 76 fields, have risen 11 percent, and its profile in the for-profit education field has soared.

“It puts them on the map in a way they haven’t been,” said Trace A. Urdan, senior analyst in San Francisco with Signal Hill, an investment bank.

And the partnership, in Wal-Mart’s eyes, could be a tool to improve American competitiveness, American Public’s chief executive, Wallace E. Boston Jr., said on Wednesday at a conference sponsored by UBS in New York.

But the choice of American Public, which has about 70,000 students in 100 countries, was a surprise on a number of fronts, analysts said. The organization is best known for its 45,000 students in a division called American Military University. The operation working with Wal-Mart, American Public University, is dwarfed by competing players.

University of Phoenix, the country’s biggest for-profit school, has nearly a half million students at 200 locations. By contrast, American Public operates from its headquarters in tiny Charles Town, W.Va., about 75 miles northwest of Washington, with 980 employees and is solely online.

In a telephone interview, Mr. Boston agreed the deal was a game changer for a school that eschews advertising and finds students primarily through word of mouth. “This partnership is getting our brand out there without us having to spend money,” he said.

Richard Garrett, a managing director of Eduventures, a higher education consulting company based in Boston, said the venture was ideal for Wal-Mart’s broad employee base. “No single or even a consortia of brick-and-mortar schools could offer face-to-face facilities” on the scale Wal-Mart required, he said.

Still, the choice of American Public might not sit well with conventional schools, said Jolene L. Knapp, executive director for the Society for College and University Planning, whose members help universities prepare for the future.

“Many in the traditional higher education world will decry this partnership,” she said. “But many, many changes are coming to postsecondary education. This is just one.”

And, she said, the arrangement could wind up transforming American Public as much as it does Wal-Mart, since it will have the opportunity to learn how the retailer operates.

Wal-Mart may be willing to share its knowledge, given that it came to American Public. There was no request for a proposal from the universities it surveyed or any open bidding process, Mr. Boston said.

Instead, Wal-Mart surveyed 81 institutions, including for-profits, nonprofits, online universities, brick-and-mortar colleges, and “even some of the open-source, open-platform online offerings that are out there,” said Alicia Ledlie Brew, senior director of Wal-Mart’s lifelong learning program.

It had several criteria: a program with clear, low pricing (American Public charges $250 a credit hour, a price that has not changed in 10 years, Mr. Boston told the UBS audience); one that was accredited; a college that offered a variety of degrees and course subjects; and one that was used to dealing with adult students.

In a survey of employees, more than two-thirds told Wal-Mart they preferred an online college to a physical one.

Wal-Mart was specifically interested in American Public’s degree program in retail management, as well as transportation logistics handling, which is among the school’s 10 most popular specialties, Mr. Boston said.

The university is offering students who already work in those areas at Wal-Mart and Sam’s Club credits for real-world experience that will count toward their degrees. Students also are receiving a 15 percent discount in the credit-hour rate. With the credits and discount, a typical cashier would pay $11,700 for an associate degree and $24,000 for a four-year degree.

(Nationally, the average tuition for a four-year degree from a public university is about $28,000, according to the College Board.)

Mr. Boston and his team stressed the organization’s history of offering classes to the nation’s more than one million military personnel. These students are often older than conventional undergraduates, hold jobs and work shifts at various times of day in different time zones.

Ms. Brew said that that background was a deciding factor for Wal-Mart in choosing American Public. Yet analysts have questioned whether it will have the resources to deal with a deluge of new students. “They can recruit counselors and faculty,” Mr. Urdan, the analyst, said. “But when you have to do it at a breakneck pace, it’s something altogether different.”

Both Ms. Brew and Mr. Boston declined to predict how many Wal-Mart employees would choose college classes once they were eligible to sign up.

For one thing, Wal-Mart employees will have to determine how to juggle the demands of online classes with their job and family responsibilities, Mr. Boston said.

“We don’t think this will explode off the start,” he said. “What we think we’ll see is early adopters, and the early adopters who like it will tell others.”

In the meantime, the two companies are still getting acquainted. Mr. Boston said the relationship was going well, but the giant retailer — used to dealing with thousands of suppliers around the world — was still adjusting to the unusual nature of their agreement.

“We had to keep reminding them in a nice way that we weren’t an outsourced provider, we’re a university,” Mr. Boston said.

THE NEW YORK TIMES