In its second-largest acquisition, Amazon buys the company for $970 million.
The real stunner is what the Guide reveals about the sales of the rest of the e-retailers in the U.S.—those who fell short of membership in the elite 500 club. While the Top 500 continued growing at double-digit rates, e-retailers ranked below the top 500 experienced a 6% decline in their web sales.
The 2009 Edition of the Top 500 Guide, which was published in mid-May, reveals something that each of the four previous editions also revealed: that e-retailing is growing faster than any other form of merchandising. This year, the 500 largest e-retailers profiled and ranked in the 432-page research guide grew their online sales 11.7%. By comparison, retail sales at stores grew a paltry 1.4%.
The real stunner is what the Guide reveals about the sales of the rest of the e-retailers in the U.S.-those who fell short of membership in the elite 500 club. They actually declined for the first time in the 14-year history of online retailing. While the Top 500 continued growing at double-digit rates, e-retailers ranked below the top 500 experienced a 6% decline in their web sales.
A rising tide lifts all boats. That saying, reportedly coined by John F. Kennedy, rang true for the online retailing industry since its beginning in the mid-1990s-until last year. In 2008, the tide ran out throughout our consumer-driven economy, and only the best and the brightest of retailers made it to the open seas in time. Overall, e-retailing grew last year by only 4.6% to $178 billion. While that was three times the growth rate of store-based retailing, the sobering fact remains that it’s the first time online retail sales grew by less than 15%.
In my view, this is not just a recessionary blip. It is, I think, the beginning of a long-overdue consolidation of the e-retailing business. All industries consolidate when the novelty wears off, and industry growth rates come down to earth. The application of Darwinian principles to economics manifests itself as the strong, proficient and smart competitors slowly relegate the weaker players to trivia questions at cocktail parties. Univac (mainframe computers); Dumont, Philco, Zenith (television); Burger Queen, Burger Chef and Red Barn (fast food); Packard, Studebaker and Hudson (autos); Schlitz, Schaefer and Carling (beer); and DEC and Commodore (personal computers) were once major players in their respective industries. All of them disappeared as those industries matured and their markets became dominated by fewer, larger and more powerful competitors.
The Great Recession of 2008-09 is right now triggering the beginning of a consolidation in the nation’s e-retailing business, where success once required little more than hooking up a computer to the Internet. This year’s Top 500 Guide reveals a telling statistic that documents this consolidation. In 2008, the Top 500 e-retailers accounted for 65% of total online sales; in every previous edition of the Guide, they accounted for a steady 61%. Here’s an equally telling number: Amazon.com increased its online retail sales last year by 29.5% to $19.2 billion. Because very few e-retailers grew like that during this recession, Amazon’s share of the total e-retailing market grew to 10.7% from 8.7% in one year’s time.
Why? Because when the tide no longer lifts all boats, only the most seaworthy survive. As markets mature, it’s easier to distinguish between excellence and mediocrity. As technology advances, serious players step up their investment, while the less dedicated and more conservative stick with what’s worked in the past.
This month’s cover story summarizes the massive amount of data we collected in the last six months on the leaders of e-retailing and profiles some of the stars in the market. We collect this data and profile the best practitioners of web retailing because our editorial mission is to help e-retailers to survive and prosper even when the tide of the retail market ebbs.