In its second-largest acquisition, Amazon buys the company for $970 million.
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Social media marketing is a top priority for FragranceNet.com, which at nearly 39% has the best compound annual growth rate for the last decade among the web-only merchants ranked in the Top 500 Guide. Social media is particularly useful as the e-retailer diversifies beyond just selling perfumes and colognes into beauty and skin care products, says CEO Jason Apfel. "We've survived for 16 years as an online retailer against a lot of bigger companies because we've always been really good at getting up close and personal with our shoppers, but we've got to get social media just right," he says. "It's how our customers are communicating."
Today revenue from social media is a small but growing part of FragranceNet.com's annual web sales of about $145 million, although Apfel won't disclose a specific figure. But FragranceNet.com is making social media promotions and integrations a big part of its upcoming web site redesign. The new product pages will feature social tools such as photo walls, interactive questions and answers, and other features.
FragranceNet.com will also integrate its product pages more closely with Facebook, Twitter and Pinterest. "We will use our site redesign and social media to promote a competitive advantage we think we have, which is providing deep content and lots of online beauty advice to shoppers," Apfel says. "We've been around this long because we've gotten pretty good at getting to know who our customers are and how they relate to us, and social media will only deepen that relationship."
Among all the web-only retailers that have held spots in the Internet Retailer rankings over the past decade, FragranceNet.com had the biggest 10-year gain in sales. It reached $145.0 million last year from $10.5 million in 2003. But among all merchants, chain retailer Urban Outfitters showed the biggest jump—more than 9000% to $663.3 million in 2012 from about $7.3 million in 2003. The fastest-growing catalog/call center company was 1-800 Contacts Inc. (No. 78), which over the course of a decade grew web sales about 1880% to $392.0 million from $19.8 million. Apple Inc. was the biggest-growing consumer brand manufacturer thanks to the explosive growth in digital music sales from iTunes, which launched in 2001, and online sales of such innovative products as iPods, iPhones and iPads. Over the course of a decade e-commerce sales for Apple (No. 3) grew 2078% to $8.83 billion in 2012 from $405.5 million in 2003.
The fastest growers over a decade in e-commerce have been the ones that have adapted to the web more quickly and aggressively than other merchants, with Amazon.com being the best example, says Scot Wingo, CEO of ChannelAdvisor Corp., a vendor that helps merchants manage stores and list on marketplaces such as Amazon. Today Amazon dominates the online retail industry—and the Top 500. In 2012, Amazon's total sales of $61.09 billion accounted for 28.3% of total Top 500 sales, 32.7% of Top 100 sales of $187.07 billion and 66.7% of all Top 500 web-only merchant sales. Minus its 2012 international sales of $26.28 billion, Amazon still single-handedly accounted for 15.4%—$34.81 billion—of all U.S. e-commerce sales of $225.50 billion and 20.2% of all U.S. Top 500 sales of $172.27 billion.
Amazon hasn't always been so dominant. A decade ago Amazon was the top-ranked Top 300 merchant, but its 2003 web sales of $5.26 billion accounted only for 13.1% of all Top 300 sales, 14.3% of the top 100 and 9.0% of all U.S. e-commerce sales. It wasn't until 2009 and 2010, when consumers began regaining confidence after coping with the biggest recession since the Great Depression, that Amazon truly emerged as a dominant retailer, Wingo says.
In the years prior to the recession Amazon steadily expanded into new merchandise categories on its own and via acquisitions, such as its $900 million purchase of online shoe retailer Zappos.com in 2009. The e-retailer added millions of square feet of fulfillment space to offer same-day delivery in many major U.S. cities and in 2007 launched Amazon Prime, a program that offers free two-day shipping on all orders along with a growing list of perks for an annual fee of $79. Amazon also was busy rolling out new products of its own, including the first version of the Kindle electronic book reader in 2007.
"All of the innovation and change Amazon put into its business coming into and out of the last recession really resonated with shoppers because it had the best deals, the most products and gave consumers a dependable and convenient online shopping experience," Wingo says.
Amazon's above-market growth is a major reason the biggest online retailers account for such a large share of all Top 500 sales. The combined 2012 web sales of the top 10 online retailers total $107.99 billion and account for 50% of all Top 500 sales; the collective sales of the top 100 are $187.07 billion, or 87% of the total web sales of merchants ranked in the Top 500 Guide.
Nonetheless, there remains room for innovative Top 500 newcomers and established merchants to grow sales. Capitalizing on its base as a daily-deal operator and trying to turn the corner on profitability, Groupon sees e-commerce and the continued success of Groupon Goods, which sells products—as opposed to vouchers—directly to consumers via the web, as essential to its future. E-commerce sales for Groupon Goods could hit $2 billion in 2013, up 339.6% from $455 million in 2011 and 9515.4% from $20.8 million in 2011, says Faisal Masud, now Staples Inc.'s vice president of global e-commerce, who, as vice president and general manager of Groupon Goods until May 2013, oversaw the division's growth. "The business is poised to grow globally," he says.
Other Top 500 merchants aren't growing nearly as fast as Groupon or NoMoreRack.com Inc. (No. 202), a flash-sale retailer that boosted e-commerce revenue year over year 1023.6% from $8.9 million to $100.0 million (See page 62 for more details). But some perennial Top 500 merchants such as Oriental Trading and Fanatics believe they're doing the right things to survive and grow.