April 21, 2014, 10:33 AM

Top merchants gain ground in the new Top 500

With combined sales that increased 17% in 2013, the Top 100 now account for 87% of all Top 500 sales, according to the just-released 2014 Internet Retailer Top 500 Guide. But fast-growing startups show there is still room in e-commerce for new ideas and business models.

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It was another big year for online retailers, according to data in the 2014 Internet Retailer Top 500 Guide.

It was another big year for online retail, and Top 500 merchants in particular. It was an especially good year for the largest retailers in the newly published and 11th annual edition of the 2014 Internet Retailer Top 500 Guide, although innovative startups continue to show that there is still room in e-commerce for new ideas and business models.

Collectively, web merchants ranked in the 2014 Internet Retailer Top 500 Guide boosted online revenue 17.1% to $255.61 billion from $218.26 billion in 2012.

But the bulk of that growth came from the very top—those retailers that bring in more than $100 million a year in e-commerce sales. The largest merchants ranked 1-100 in the Top 500 Guide, or those with annual web sales north of $300 million, grew 2013 online sales 17.4% to $221.09 billion in 2013. Those in the next tier, Nos. 101-200 grew at 17.1%. But retailers in the middle and bottom of the rankings grew far slower. Retailers No. 201 through 300, for example, boosted web sales 12.5% to $8.27 billion and Nos. 401-500 grew 12.3% to $2.76 billion.

All online retailers are going up against the growing goliath that is Amazon.com Inc. (No. 1), which is taking market share from retailers online and offline by in many cases out-pricing them, delivering products faster and cheaper than most merchants, and by offering an increasingly wide selection of products in a growing number of categories, retailers and experts say. Smaller and midsized merchants are also competing online with large store-based retailers that are investing millions of dollars—in some cases hundreds of millions—on initiatives aimed at using their stores and web sites in concert to keep customers from defecting to Amazon and other web-only rivals. Many retail chains refer to that combined web/store strategy as “omnichannel” retailing.

“Amazon continues to grow, and the bricks-and-mortar guys have really woken up to the whole concept of omnichannel,” says Scot Wingo, CEO of online marketing firm ChannelAdvisor Corp. “It’s a lot of competition and it’s really hard out there to differentiate yourself.”

Perennial leader Amazon.com continues to grow faster than the Top 500 as a whole and exceeded the 16.9% that the U.S. Department of Commerce says total e-retail sales grew by in 2013. The merchant, which increased its e-commerce sales 20.3% in 2013 to an Internet Retailer-estimated $67.86 billion from $56.41 billion in 2012, was singlehandedly responsible for nearly one-third of total Top 500 growth.

To keep hold of its No. 1 position and drive further growth, North America’s largest online retailer in 2013 expanded fulfillment capacity and increased its Prime membership base. Those Prime members are typically inclined to think of Amazon first because they’re guaranteed free, two-day shipping in exchange for their annual membership fee, which Amazon raised recently to $99 from $79. An estimated 23 million U.S. consumers are Prime members. On the fulfillment front, Amazon operated around 55 distribution centers in North America at the end of the year and 100 or more worldwide, according to ChannelAdvisor’s Wingo, a close Amazon observer.

The biggest retail chain ranked in the newly released Top 500 Guide was Staples (No. 3), which grew web sales 1% to $10.4 billion in 2013 and accounted for 4.1% of all Top 500 sales. In comparison the largest catalog/call center company, Liberty Interactive Corp. (No. 6) increased e-commerce sales 11.6% to $4.80 billion, primarily through its QVC TV shopping network that books most of its sales online. That Liberty Interactive figure accounted for 1.9% of all Top 500 sales. With web sales that grew 24% to $18.3 billion in 2013, Apple was the biggest consumer brand manufacturer ranked in the new 2014 Top 500 Guide and its annual web sales accounted for 7.2% of all Top 500 sales.

For more information on how to order the 2014 edition of Internet Retailer's Top 500 Guide click here.

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