June 3, 2004, 12:00 AM

The reasons behind the numbers

Leading web sites don’t just happen. They require the support and attention of top management; continual analysis, refinement and upgrades; regular investment in new technology and aggressive marketing.

A key part of Internet Retailer’s mission is to write about innovative retail web sites. While we do analyze the mistakes of some web merchants, our focus is on covering the most successful e-retailing operations. Over the years, we have put the spotlight on a good number of well run retail web sites, and our readers have profited by learning from the lessons of such innovators.

This month we introduced our first annual Top 300 Guide, which ranks the top retail web sites based on their 2003 online sales, provides key operating statistics about them and profiles their web strategies. As I examined this list, it was evident that most of the leaders in this first ever ranking of the e-retailing industry have received considerable coverage in our magazine. It’s a sure sign that the good operating practices, innovative marketing plans, and breakthrough technologies that caught our editors’ attention also impressed web shoppers and produced solid financial results.

The message is simply this: Leading web sites don’t just happen. They require the support and attention of top management; continual analysis, refinement and upgrades; regular investment in new technology and aggressive marketing. When anyone tells me that the web has not become a successful part of their retailing operation, I examine their web site and quickly find out why. The site is hard to navigate and needs a good dose of web analytics. Its search function doesn’t produce helpful results. Its content is uninspiring and uninformative; its order mechanism is time consuming.

Our analysis of the Top 300 web sites in this issue (page 24) identifies the leading web sites in 12 major retail market segments. Invariably, these sites are also leaders in implementing best web merchandising practices. Their success is no fluke. And success in other merchandising channels does not automatically bring success on the web. If that were the case, Wal-Mart, with its massive buying power, brand awareness and millions of loyal shoppers, would be the largest retail web site instead of Amazon, and smaller mass merchants, like Sears, Roebuck and Target Stores, would not outrank it in Internet sales.

And consider Neiman Marcus. With only 35 stores nationwide, it ranks only 65th among all store-based retail chains in total sales, and a half dozen other department store chains outrank it in overall size. Yet, the Dallas-based chain’s web site last year generated more sales than any competing department store site, accounting for fully 7.5% of Neiman’s total sales. That may come as a surprise to some retail executives who have not noticed the attention Neiman Marcus lavishes on its web site and are oblivious to its well-conceived strategy of using the web to extend its powerful upscale brand to markets where it has no outlets. There are dozens of other examples where smaller competitors in store or direct retailing have bigger web sites than their traditional competitors as well as examples where traditional merchants in a category have been bested by upstart virtual merchants.

Why do some merchants do well on the web while others struggle? The answer is not found in powerful retail brands or traditional market leadership. While some market leaders have wisely duplicated on the web their success in store and catalog merchandising (Gap, Lands`End, Barnes & Noble, Home Depot, Office Depot, Toys R Us, among others, come to mind), others have not. Nor is the answer that some types of merchandise are suitable for the web and some are not. If nothing else, our Top 300 Guide proves that almost anything sold in catalogs or stores can be sold on the web if a merchant is intent on following those strategies that bring success.

jack@verticalwebmedia.com

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