June 1, 2012, 12:00 AM

Run for the money

(Page 2 of 3)

Many retail chains, in particular, seeing more consumers shopping online or checking e-retailers' prices while in bricks-and-mortar stores, need to concentrate more on any available e-commerce opportunity and on using the web more effectively to drive sales across all channels," Rosenblum says. "I sometimes think chain retailers don't understand their customers and their path to purchase because they don't necessarily want to go to more stores," Rosenblum says. "Instead they want their favorite retail brands to save them time and make it more convenient to shop, and the opportunity to do that is online."

Chain reaction

Top 500 data show that it wasn't necessarily the biggest retail chains that grew the most online last year. Web sales for the top 100 chain retailers increased year over year about 15.6% to $56.7 billion from $49.0 billion, well above the growth rate for all Top 500 retail chains of 14.7%. But the fastest-growing group among chain retailers was those ranked from 301 to 400 that collectively grew their sales 17.0% to $990.3 million in 2011 from $846.3 million in the prior year. Among the leaders in that cohort were Party City Corp. (No. 302), which grew e-commerce 200% to $40.2 million in 2011 from $13.4 million in 2010, and Tilly's Inc. (No. 304). Web sales for Tilly's increased 41.6% to around $40 million year over year from about $28.3 million.

In many cases, retail chains are closing stores, and some are pouring significantly more resources into their web channel—and expecting even greater results. Over the next five years Nordstrom (No. 31) will sink nearly $1 billion into its e-commerce infrastructure in an effort to grow web sales, which increased 30% to an Internet Retailer-estimated $916.5 million in 2011. Having increased sales 36.2% to just over $1 billion in 2011, Kohl's Corp. (No. 28) is spending up to $500 million over the next several years to open as many as five regional fulfillment centers to support its e-commerce operations. And Lowe's Cos. Inc. (No. 47) credits more than doubling the number of SKUs it offers online to about 225,000 as a key reason web sales increased 70% to an Internet Retailer-estimated $510 million in 2011.

At upscale department store chain Saks Fifth Avenue (No. 38) web sales increased 28% to an Internet Retailer-estimated $748.6 million in 2011 as the company embarked on a five-part e-commerce upgrade strategy that included adding on major new functions such as more advanced site search, improved iPhone and iPad mobile apps, deeper editorial content such as a new online magazine site, SaksPOV, and expanded private-sale events. "We had a fairly typical year for us," says Saks chief marketing officer Denise Incandela. "We began acting on a plan two years ago to address how more digitally connected consumers are shopping today."

Advancing retailers

Like retail chains, other types of web merchants such as catalogers, web-only merchants and consumer brand manufacturers are concentrating on growing their niche businesses, looking for new opportunities in areas such as mobile commerce or laying the groundwork to sell internationally via the web.

The fastest-growing Top 500 retailer in the latest ranking is web-only merchant Jackthreads.com (No. 440), which increased 2011 web sales by about 359% to $20.2 million from $4.4 million in 2010. Jackthreads is on the sales fast-track because the company is focused exclusively on servicing its core shopping audience of fashion-conscious young men. To enhance growth online last year Jackthreads developed a broader social media program by adding new features such as a $10 credit for a member whose product Like on the company's Facebook page leads to a purchase by another shopper, says CEO Jason Ross. "We added some social tools in 2011 and made it easy to share items through Facebook and Twitter when a shopper is making a purchase," Ross says.

At QVC, the biggest Top 500 catalog/call center operator, U.S. web sales last year increased 25.6% to $2.16 billion from $1.72 billion in 2010 in part because the company is pushing heavily to generate more online sales from consumers shopping on mobile phones and tablet computers. At its annual investor's conference in New York in November, QVC CEO Mike George said QVC was on track to generate total mobile sales of about $380 million worldwide in 2011, including about $220 million in the U.S. "Some of our best customers are engaging with us the most on their mobile device," George told analysts.

For some consumer brand manufacturers, the key to growth in the increasingly competitive online apparel and accessories market is becoming more of an international web merchant. In 2011 Tory Burch (No. 240) grew web sales year more than 90.3% to $59 million from $31 million and then laid the foundation for developing more Internet business overseas. With a new e-commerce platform from Demandware Inc., Tory Burch now has nine international web stores up and running, a number that the company expects to reach 30 in 2012, says chief marketing officer Miki Berardelli. "We are on our way to becoming a more global e-commerce brand," Berardelli says.

Lagging behind

In a fast-changing online retailing market some Top 500 merchants came up short in 2011. In just the past year, in addition to being acquired through bankruptcy by Dish Network Inc. and closing about 3,000 stores, Blockbuster (No. 133) lost more than three-fourths of its online sales, falling to an Internet Retailer-estimated $136.5 million from $569.3 million in 2010. That was primarily the result of big drop in customers of Total Access, which gave subscribers the option of returning their online rental DVDs by mail or exchanging them at participating Blockbuster stores.

In the wake of an ongoing company restructuring, web sales for Coldwater Creek Inc. (No. 134) dropped 29.2% to an Internet Retailer-estimated $136 million in 2011 from $192.1 million in 2011, while a drop in the popularity of a line of athletic shoes contributed to a decline in web sales for Skechers USA Inc. (No. 441) of 27.2% to $20.1 million in 2011 from $27.6 million in 2010.

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