July 31, 2007, 12:00 AM

IRCE 2007: Report from the Conference

(Page 2 of 4)

Schofman calls the data Callaway posts online on pre-owned club trade-in values the "Blue Book" of the industry. "Retailers take no inventory risk," he said. "It`s all off our `Blue Book.` Our back end allows us to pay higher trade-in dollars, and the trade-in business feeds the pre-owned business."

Schofman encouraged retailers to work with manufacturers to develop programs that leverage each other`s strengths.

A bigger Wal-Mart

Wal-Mart: The Giant Uses the Web to Extend its Market Reach
Brian Osborn, vice president of marketing, Walmart.com

Brian Osborn noted that while Walmart.com customers are slightly more affluent and younger than the core customers who shop Wal-Mart`s stores only, web shoppers also shop its stores. Osborn shared three initiatives recently launched online by the retailer geared toward helping both online and offline customers shop Wal-Mart more easily.

The first is a redesigned Walmart.com, which went up last October. Conceding that some consumers found the former site difficult to use, Osborn says the new site offers a better-organized home page, with streamlined left-hand navigation. Category tabs across the top are limited to a single row and key categories are identified as customers--not Wal-Mart`s merchandisers--view them. The same structure follows on inside category pages.

In a second initiative, Wal-Mart, which has been testing the order online/pick up in store concept since 2004 in some stores, expected to roll that option out to all U.S. stores by July, Osborn said. "Half the customers who pick up a site-to-store purchase buy $60 more when they are in the store," he notes. A third program, online visibility into in-store availability of products, started in April with 600 consumer electronics SKUs. Early results have been "positive," Osborn said.

"We will continue the drive to make shopping easier," Osborn added. "We believe the Internet is just scratching the surface in driving sales online and offline."

A closed case on the open Internet?

The Face-Off over Internet Regulation
David McClure, U.S. Internet Industry Association
Tod Cohen, vice president, global governance affairs, eBay Inc.

David McClure, president and CEO of a trade group representing telecommunications companies and others that provide Internet services and equipment, and Tod Cohen, vice president of global government affairs at one of the web`s largest retail organizations, shared opposing views on the future of and need for Internet regulation.

McClure dismissed as a "dying issue" concerns over the protection of "network neutrality"--basically, a non-tiered Internet service environment in which content owners such as retailers don`t have to pay telcos for faster content delivery. Though telcos are looking for revenue to support infrastructure building costs, setting up an Internetwide system of usage fees is impractical, McClure has said previously--one reason telcos say federal regulation of this aspect of Internet service isn`t necessary. A larger threat to e-commerce, McClure argued, is Internet taxation and state and local governments.

But in the absence of regulation limiting telcos from pursuing a tiered payment system for service, retail organizations remain concerned, and many, like eBay, are lining up on the side of establishing such regulation to protect network neutrality for the future. A tiered system, argues Cohen, would stifle innovation, as shoppers and their dollars would gravitate toward the "fast lane," that is, speedier Internet connections dominated by the wealthiest companies and web sites able to pay for it.

"Content from some sources can`t get preferred or exclusive treatment from an Internet network operator," Cohen says. "Data can`t cut in line ahead of data from other content sources. We support an `open` Internet."

GENERAL SESSIONS
JUNE 6, 2007

Small retailers, big growth

The Stars of the Top 500 Guide
Kurt Peters, editor-in-chief, Internet Retailer

The 100 smallest retailers in the Internet Retailer 2007 Top 500 Guide outperformed the Top 100 in web sales increases, growing by 23% and 19% respectively. The industry average growth rate remained at 25%, compared to growth for all Top 500 companies at 21.3%.

Sales growth among the smallest e-retailers indicates that the web continues to be fertile soil that creates a national market for niche players, said Kurt Peters, editor-in-chief of Internet Retailer magazine, said at IR2007.

Further evidence that the Internet enables the meek to compete with the mighty: the Top 25 retailers grew their combined 2006 sales to $52.9 billion, up 18% from $44.8 billion in 2005. By contrast, younger companies--those in business since 2004--grew by 55%, from $319 million in 2005 to $494 million in 2006.

The largest retailers still racked up imposing numbers and the ranks of billion-dollar retailers rose to 17 from 14 in 2006, Peters said. And total sales for the bottom 300 retailers were equal to Amazon.com`s sales growth in 2006 of $2.2 billion.

Among the largest online retailers, familiar names held down the top spots: Amazon.com was No. 1 as it was last year, followed by Staples and Office Depot--who flipped positions from the 2006 rankings. However, keeping up with or exceeding the industry`s 25% growth rate was accomplished only by Amazon, at 26%, and Staples, 29%.

Netflix continues to innovate

Day 2 Keynote Address: The Transformation of the Movie Rental Industry
Reed Hastings, CEO, Netflix Inc.

Netflix is leading the pack in online DVD rental, but Reed Hastings knows that lead won`t last forever. To stave off decline, e-retailers like Netflix need to innovate at the speed of the Internet, he says.

Hastings, founder, chairman and CEO of Netflix Inc., was one of two keynote speakers at the Internet Retailer 2007 Conference & Exhibition in San Jose, Calif. Although his movie rental business has 6.8 million members and 80,000 titles, and ships 1.6 million DVDs per day, computer-based movies and TV shows are the latest and greatest things for Netflix.

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