Most may be profitable, but online retailers still face challenges

Online retailers may be profitable for the most part, according to the most recent Shop.org State of Online Retailing Report. But they still have plenty of issues to deal with, online retailers told attendees of the “State of Retailing Online” session at the NRF annual convention this week.

Kate Delhagen, analyst with Forrester Research Inc. which participated in Shop.org’s study, reported that 92% of retailers with catalog backgrounds, 80% of store-based retailers and 50% of pure-play web retailers had positive operating margins in the latest study.

But the panelists of Monica Luechtefeld, executive vice president of Office Depot Inc., Elaine Rubin, chair of Shop.org and senior vice president of strategy and business development at 1-800-Flowers.com , and Lorna Borenstein, vice president and general manager of eBay Inc., outlined some of the challenges that retailers still must confront in implementing a web strategy. “1-800-Flowers finally has a fully integrated customer database,” Rubin said. “Now we need to segment it with offers targeted to more particular shoppers.”

In the case of eBay, the company faces the dual challenge of serving experienced eBay buyers and sellers while attracting novices, Borenstein said. “We’re still trying to create this big brand,” she said. At that point, Delhagen interrupted her and asked to laughter from attendees, “Does anyone in here not know eBay?”

Luechtefeld noted that Office Depot, while operating a very successful web site with $2.5 billion in annual sales, is awaiting the development of web-based kiosks as a way to expand store assortment. “We are looking at what grocery stores and airlines are doing to educate the masses about kiosks,” she said. Luechtefeld predicted that 2005 will be the year that retailers will have to start deploying web-based kiosks to remain competitive.