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Many Top 500 consumer brand manufacturers, once considered e-commerce laggards, also now see the web and e-commerce in a broader and more important light, particularly as they look to build even bigger international brands and generate more sales directly from the public online. For example, Nike Inc. (No. 47) used its e-commerce channel to generate $326.5 million in online sales in 2007, up 45.6% from $224.3 million in 2006.
Though online sales accounted for only 2% of Nike’s total revenue last year of $16.3 billion, the company is committed to turning its web channel into a more significant sales and strategic tool going forward, CEO Mark Parker told analysts on the company’s first quarter earnings call.
“E-commerce today is a small percentage of our business relative to what we think it could or should be,” Parker said. “We sort of woke up a year ago and said we want to move this from, to speak candidly, a bit of a hobby to a real commitment to pursuing the full potential of one of the fastest growing channels on the planet.”
Ralph Lauren Media LLC, the e-commerce arm of Polo Ralph Lauren Corp. (No. 87), is also among the manufacturers making a bigger commitment to the Internet. In 2007, Ralph Lauren, which increased its annual web sales by 25% to $150 million from $120 million, spent $43.7 million to acquire all remaining shares of Ralph Lauren Media from ValueVision Media Inc.
The company also opened a state-of-the-art e-commerce call center and customer service facility in Greensboro, N.C., this spring to handle its growing e-commerce business.
“We made a very early commitment to the online business back in 2000, and we spent years really learning and investing in how that would operate,” Ralph Lauren’s president and chief operating officer Roger Farah told Wall Street analysts on the company’s second quarter earnings call. “I think our desire to see that as a huge future platform speaks as to why we bought the 50% back that we didn’t own.”
Many individual Top 500 retailers kept pace or exceeded the industry’s growth rate in 2007, but equally impressive is the diversity of sales. Last year all 14 Top 500 merchant categories posted larger combined sales, including four-apparel/accessories, books/music/video, jewelry and mass merchant-which exceeded the industry average. The biggest growth occurred among online jewelry merchants who combined for sales of $1.05 billion, up 36% from one year ago. They were followed by online books/music/video retailers, which grew by 32% to $4.1 billion in 2007, and mass merchants and department stores, up by 31% to $29.3 billion. Apparel and accessories retailers grew their combined web sales by 24% to $12.4 billion in 2007.
As 2007 ended and the U.S. economy slipped into what many economists now see as a recession, some analysts expect the overall retail market to slow even more this year. But the exception to stagnant store and catalog sales will continue to be the Internet. “The growth in the retail industry will continue to come primarily from the web and not other channels,” says Antall. “People are shopping less in stores or picking up the phone and calling in a catalog order. Shoppers will keep on migrating to the web because it’s now easier, convenient and mainstream.”
The Top 500: Key operating statistics
The concentration of the e-retailing industry mirrors that of all retailing. The Top 500 e-retailers account for 61.3% of all online sales, but the top 100 dominate. The top 100 control 53% of retail web sales. By comparison the top 100 store-based retailers control more than 60% of all retail sales in the U.S., not including automobile and restaurant sales.
Web site traffic
In 2007 the Top 500 retail web sites received 1.88 billion average monthly visits. There are 188 million Internet users in the U.S., who visited an average of 10 retail sites each month in 2007.
The Top 500 retail sites recorded an estimated 456 million separate sales in 2007 with an average ticket across merchandise categories of $223. Sales conversions based on monthly visits vary widely, ranging from 0.3% to 10.75% for chain retailers, 0.65% to 31% for catalog/call center operators, 0.12% to 19% for web-only merchants and 0.25% to 10% for consumer brand manufacturers.
Web sales of the Top 100
The sales of the top 100 retail web sites in 2007 accounted for 86% of the Top 500 sales of $101.7 billion.
Researchers contacted hundreds of retailers over six months. The starting point of data gathering was the rankings of retailers’ web traffic from comScore Inc. and Nielsen Online. That list was supplemented with retailers that Internet Retailer has covered.
Web sales. Whenever possible, web sales listed in the guide came from the company. If the company did not provide sales figures, Internet Retailer estimated sales based on traffic and an assumed conversion rate and average ticket for that retailer’s category-as well as on analyst interviews-to formulate estimates. Retailers were given multiple opportunities to review and respond to estimates.
Visits and unique visitors. Official numbers were supplied by many retailers. When a retailer did not reveal figures, researchers used comScore, Nielsen Online or Internet Retailer estimates. Retailers were given the opportunity to respond to estimates.
Conversion rates. In most cases, researchers used category data and analyst interviews to formulate estimates if a retailer did not reveal a number. Retailers were given the opportunity to respond to estimates.
Average ticket. If a retailer would not reveal an average ticket, researchers estimated the figure based on averages within a category and input from market analysts. Retailers were given the opportunity to respond to estimates.