May 31, 2011, 4:59 PM

What the 2011 Top 500 reveals

(Page 3 of 7)

Creating an opportunity for growth can also mean knowing when the time is right to expand—even if the rest of the market isn't. In late 2008, at the height of the financial crisis, Power Equipment Direct (No. 250), operator of nine niche sites selling snow blowers, lawn mowers, sump pumps and tillers, made the decision to launch five additional sites. "We saw the recession coming, saw other people pulling back and decided to plant an entire orchard and not just one seed," says Power Equipment Direct CEO Jon Hoch. "We knew then we were going to spend a lot of time nurturing those sites into successful web stores."

In 2010, the expansion—and nurturing—paid off. Sales for Power Equipment Direct increased 71.4% last year to $49.7 million from $29 million. With five new web sites selling specialized motorized equipment, Power Equipment Direct is now developing faster and more sophisticated ways to shop. The retailer also is working to improve customer service with dedicated equipment specialists for each site.

It's also upgraded site design. Better navigation on niche sites such as MowersDirect.com now help shoppers find lawn mowers and tillers by style, grade, width and brand. Product pages also feature the photos of dedicated sales agents that customers can call or e-mail to discuss specific brands and manufacturer specifications.

"Other sites may kill the customer with kindness, but we are out to overwhelm them with expertise," says Hoch. "A big-box retail site may feature an image, a few brands and only a couple of product specifications, but our niche is power equipment. Three years ago we launched more niche sites to eventually grow the business. Now we are sustaining that growth with our product knowledge and customer service expertise."

As a group, web-only retailers remain the fastest-growing merchant type among all Top 500 merchants because they are running leaner operations following the recession and aren't afraid to take advantage of new opportunity, says Ken Burke, founder and chairman of e-commerce service provider MarketLive Inc. "The web-only merchant category is where you find more entrepreneurs and risk-takers," says Burke. "Many web-only retailers took advantage of new business development opportunities during the recession or jumped on mobile commerce and social media when they showed signs of accelerating."

Looking after the (web) store

Top 500 chain retailers concentrate more resources on e-commerce, their fastest-growing channel
After a dismal 2009 at bricks-and-mortar stores, many retail chains reported improved comparable-store sales in 2010. But web sales grew much faster for many of the biggest chains and now account for a significantly larger part of their total sales.

Consider these facts:

  • Total web sales for all Top 500 chain retailers grew to $55.32 billion in 2010, an increase of 11.3% from sales of $49.68 billion in 2009.
  • At 42 of 65, or 64.6%, of leading department store, specialty apparel, general merchandise and other chain retailers, the growth online in 2010 exceeded the increase in annual comparable-store sales. That compares with 37 (57%) of 65 Top 500 retail chains in 2009.
  • The web accounted for more than 30% of all sales at four big chains—Staples Inc. (No. 2), Office Depot Inc. (No. 5), Williams-Sonoma Inc. (No. 25) and dELiA*s Inc. (No. 175). Six other chains—including Saks Fifth Avenue (No. 38), Urban Outfitters Inc. (No. 48), American Eagle Outfitters Inc. (No. 57), Recreational Equipment Inc. (No. 62), Coldwater Creek Inc. (No. 93) and The Talbots Inc. (No. 112)—reported that e-commerce generated more than 10% of all sales last year.
  • E-commerce paid big dividends for Toys 'R' Us Inc. (No. 29) in 2010. Web sales increased 29.9% to $782 million last year from $602 million in 2009 while total sales grew only 2.2% year over year to $13.86 billion. Internet Retailer calculates the web accounted for 5.6% of total sales in 2010, and generated 60% of growth across all channels.

E-commerce continues to outperform same-store sales at many chains because shoppers increasingly are researching products online, and then in many cases taking advantage of the speed and convenience of online retailing to complete a transaction, says Jim Okamura, managing director of Chicago retailing consulting firm Okamura Consulting.

"The chains are getting better at enhancing the user experience on their e-commerce sites and that's accounting for more sales shifting from the stores to the web," says Okamura. "Consumers know they can research product availability and price online and then go to the store, but once they are on a chain retailer's site they're choosing to complete their purchase online."

It's no longer news that the web is the fastest-growing channel for retail chains, but the online growth for some chains is striking.

Following are examples of the five fastest-growing Top 500 chains online:

  • LuLuLemon Athletica Inc. (No. 229). Web sales increased 213% to $57.3 million in 2010 from $18.3 million in 2009. Total sales increased year over year 57% to $711.7 million from $452.9 million while comparable-stores sales increased by 30%.
  • The Men's Wearhouse Inc. (No. 363). E-commerce revenue increased 155% to $25.5 million last year from $10 million in the prior year. Total sales increased year over year 10.5% to $2.10 billion in 2010 from $1.90 billion in 2009 while comparable-store sales increased by 4.7%.
  • Belk Inc. (No. 296). Web sales increased 70% to $34.8 million in 2010 from $20.5 million in 2009. Total sales increased about 5.1% to $3.51 billion from $3.34 billion in 2009. Comparable-store sales increased 5.1%.
  • Ann Inc. (No. 95 and formerly Ann Taylor Stores Corp.). E-commerce sales increased 55.8% to $189.5 million in 2010 from $121.6 million in 2009 while total sales rose year over year 8.8% to $1.98 billion from $1.82 billion. Comparable-store sales increased 18.7%.
  • Express Inc. (No. 124). Web sales rose 55.3% in 2010 to $147.5 million from $95.0 million in 2009 and total sales increased year over year 11.8% to $1.90 billion from $1.70 billion. Comparable-store sales increased 7%.

"There's a return on investment mandate for spending more on the web channel at many of the big chains," says Okamura. "More chains see their growth coming online, and that's where they are committing more resources."

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