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All dressed up
Well-positioned in the social media era, apparel makers grow faster than other brand manufacturers.
Associate Editor, Research
Apparel brands have made the biggest strides in web sales among consumer goods manufacturers over the last decade, a trend that continued in 2012. Ten of the 18 brand manufacturers that have been ranked by Internet Retailer for the last decade are in the apparel/accessories category.
E-commerce sites' increasingly rich imagery and online shoppers' increased penchant for sharing favorite products via social networks help explain apparel manufacturer's rise online, says Nikki Baird, managing partner at research and consulting firm Retail Systems Research LLC. "While computers can be sexy, it's much easier for a fashion retailer to create unique and exciting content that shoppers share using social media," she says.
Besides encouraging consumers to talk about their products via social media, brand manufacturers are building their names online, and in some cases sales, by better presenting their products to consumers via mobile devices that shoppers are using in stores and at home, and by expanding their web sales internationally.
But solely in terms of sales, consumer brand manufacturers haven't fared as well online as web-only merchants, retail chains and retailers that sell via catalogs and TV home shopping shows and infomercials.
Of the 300 retailers listed in Internet Retailer's first ranking of online retailers by sales 10 years ago, 38 were manufacturers. The group's collective 2003 web sales were roughly $8.14 billion, representing 20.2% of the Top 300 sales. While this left them well behind retail chains (40.6%), the group was within arm's reach of the web-only retailers (24.1%), the second-largest merchant type in the guide.
However, in the 2013 edition of the Top 500 Guide the 66 brand manufacturers' 2012 web sales of $24.54 billion represent just 11.4% of overall Top 500 sales, up slightly from 11.3% in 2011.
That share of sales would be smaller if not for the growth of Apple Inc., No. 3 in the 2013 Top 500 Guide, to $8.83 billion in web sales, which accounts for more than one-third of this year's combined Top 500 consumer brand manufacturer web sales. While most manufacturers are growing web sales at a steady but unspectacular rate, web-only merchants raised their share from 24% 10 years ago to more than 42% in Top 500 sales this year, due in large part to explosive growth by Amazon.com Inc. (No. 1).
But sales are not the sole focus for many manufacturers' web sites. Instead, they focus on alluring imagery and useful product information, hoping to encourage consumers to buy, whether it's on the manufacturer's site or at a retailer's physical or online store.
Instead of channel conflict, the goal is "channel harmony," says Debra Clark, senior vice president of marketing at Lafayette 148 New York, a maker of designer apparel for women. "We've found that there are more opportunities to generate sales and product awareness through multiple channels than there are conflicts," Clark says. "There can be a perception that one hurts the other, but typically strong performance in one sales channel can identify an opportunity in another."
Like many fashion brands, Lafayette 148 (No. 331) was relatively late to start selling online, launching its e-commerce site in 2005. But now that it does, its sales have steadily grown, reaching $41.1 million in 2012. The web site shows merchandise at list price, to avoid competing on price with the 400 North American stores that sell its line.
Among the manufacturers that have grown the fastest online in the last decade is The Estee Lauder Cos. Inc. (No. 59). The company has increased its web sales from just over $12.5 million in 2003 to $512.0 million in 2012, a 51% compound annual growth rate that is the highest of the 18 consumer brand manufacturers that Internet Retailer has ranked for the past decade.
As it has grown internationally, the cosmetics maker has built e-commerce sites that fit its customers' mentalities in each market, while complying with regulations on health and beauty products, says Russ Moorehead, vice president of digital strategy and operations.
Estee Lauder has made mobile commerce a priority, launching 64 mobile-optimized sites worldwide across its various brands, 37 in the last year. Moorehead says mobile commerce and brand manufacturers are a natural fit as more consumers use smartphones as research tools. He says, for example, that devoted shoppers are more likely to check the web site for MAC Cosmetics, Estee Lauder's most highly trafficked mobile site, than any other site before buying a beauty product in a department store.
Fashion apparel maker Tory Burch (No. 186) is another manufacturer taking advantage of advances in mobile device technology to build its sales. The retailer provides iPads to employees in its 65 stores so they can help shoppers find products in a size or color that might be out of stock, or let customers see what they've ordered previously.
Miki Berardelli, chief marketing officer at Tory Burch, says web sales are not the sole focus of the company's digital initiatives. "We think it's important to position our web site and mobile footprint as much more than an e-commerce destination," Berardelli says. "It is where our customer can see the most comprehensive assortment of our products and gets the most information about our collection."
Inspiration and brand awareness are important online goals for many consumer brand manufacturers. Another is not to anger retailers by competing aggressively on price. As long as most consumer goods makers rely primarily on retail stores to sell their goods, the fear of channel conflict will keep them from selling as much as they could online. That means their success on the web must be measured not just by web sales, but also by the web's impact on results in all sales channels.