May 31, 2011, 4:59 PM

What the 2011 Top 500 reveals

Web-only merchants - not just Amazon - are gaining share in online retail sales.

Lead Photo

The big get bigger

The largest web merchants get the biggest bounce as Top 500 retailers rebound from the Great Recession
A healing economy and a slowly improving jobs market gave consumers confidence to spend more in 2010. And when consumers were in the mood to shop, they spent more of their time and money online.

In 2009, a deep recession and a drop in consumer spending caused the U.S. business-to-consumer e-commerce market to grow by just 2% while total retail sales fell by 8%. But in 2010 the North American online retail market didn't just snap back—it grew with gusto.

Sales of the Top 500 retailers grew 18% to $150.0 billion in 2010 from $127.1 billion in 2009 while total U.S. e-commerce sales increased year over year 14.8% to $165.4 billion from $144.1 billion, according to the Department of Commerce. In Canada, based on an Internet Retailer analysis of e-commerce data from Forrester Research and Statistics Canada, the government agency equivalent of the U.S. Census Bureau, online retailing sales grew by 8.1% to an estimated $8.0 billion last year from $7.4 billion in the prior year.

In 2010, total U.S. retail sales grew 7.2% to $3.89 trillion from $3.63 trillion in 2009. But the online channel remains the fastest-growing segment in the retailing industry. "An improved economy certainly helped, but what fueled excellent growth online last year is the fact that shoppers are getting even more hooked on the convenience of researching and then buying products over the web," says Lauren Freedman, president of The E-tailing Group, a Chicago research firm. "Today shoppers can use their computer or smartphone to shop where and when they want."

This year's Top 500 Guide reveals several trends that emphasize consumers' continuing shift to online buying and the gains of large retailers:

  • Top 500 retailers grew their collective sales in the U.S. to $127.1 billion in 2010 from $105.8 billion in 2009, an increase of 20.1%. Last year, Top 500 retailers and their U.S. sales accounted for 76.8% of all domestic e-commerce sales compared with 73.4% in 2009.
  • In 2010, 178—35.6%—Top 500 merchants met or exceeded the annual e-commerce growth rate of 14.8%. Of those, 146 merchants—29.2%—met or exceeded the annual growth rate of 18%.
  • The largest e-retailers grew the fastest last year. The Top 100 grew 18.8% to $129.4 billion in 2010 from $108.9 billion in 2009. In comparison, web merchants ranked from 101 to 200 grew year over year 14.1% to $11.39 billion from $9.98 billion, while retailers ranked 201 to 300 increased their collective sales 11.1% to just over $5 billion from $4.5 billion and retailers numbered 301 to 400 grew year over year 11.3% to $2.65 billion from $2.38 billion. The merchants ranked 401 to 500 grew their combined sales 11.6% to $1.54 billion in 2010 from $1.38 billion in 2009.
  • The Top 500 retailers completed an estimated 748.2 million sales transactions in 2010—up 16.5% from an estimated 642 million in '09.
  • Total traffic to the Top 500 retailers' web sites increased year over year 9.3% to 2.82 billion visits from 2.58 billion.
  • U.S. web sales now account for 7.9% of retail sales in categories of products that consumers often buy online, up from 7.2% a year earlier. That Internet Retailer calculation excluded from total retail purchases at restaurants and gasoline stations, and sales of heating fuel and groceries.

In 2010, all major merchant categories, including web-only merchants, chain retailers, consumer brand manufacturers and catalog/call center companies, increased sales, but it was the web-only merchants that grew the fastest. Driven by Amazon.com (No. 1), the combined sales of all Top 500 web-only merchants grew 30.6% to about $56.89 billion last year from $43.55 billion in 2009. In comparison, sales for chain retailers increased to $55.32 billion, an increase of 11.3% from sales of $49.68 billion in 2009 and consumer brand manufacturers grew web sales year over year 12.5% to $17.41 billion from $15.48 billion. The group with the slowest growth rate—Top 500 catalog/call center companies—grew 10.8% to $20.43 billion in 2010 from $18.44 billion in 2009.

Amazon.com continues to dominate the Top 500 as well as the U.S. business-to-consumer e-commerce market. Overall Amazon grew sales to $34.20 billion in 2010, a 39.5% increase from $24.51 billion last year. Amazon's North American sales, which totaled $18.7 billion, up 46.1% from $12.8 billion in 2009, also were big enough to account for 12.5% of all North American Top 500 sales and 11.3% of all U.S. e-commerce sales. In comparison, the 2010 web sales for Staples Inc. (No. 2) of $10.2 billion accounted for 6.8% and 6.2%, respectively, of all Top 500 and U.S. e-commerce sales.

"It's not quite a market of Amazon and then everyone else but it can sure feel that way if you look at the annual numbers they keep putting up and you are a retailer always chasing the market leader," says Scot Wingo, CEO of ChannelAdvisor Corp., which helps retailers sell through online marketplaces such as Amazon and eBay, and a longtime Amazon observer. "As a company, Amazon just got fanatical early on about low prices, cutting-edge technology and great customer service and that's been their competitive advantage ever since."

Amazon.com was the market leader everyone else chased in 2010. But other merchant group leaders also grew by innovative niche retailing, expanding inventory and rolling out better technology. With web sales that increased 1,150% to $77 million in 2010 from $6.2 million in the prior year, Beyond the Rack (No. 191) was the fastest-growing merchant among all Top 500 retailers and among web-only merchants. Beyond the Rack launched one of the first private-sale sites in Canada and has attracted more than 2.5 million customers since its debut in early 2009.

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