7/10/12

No second fiddle for Second 500 chain retailers

Sticking with a niche pays dividends.

Mark Brohan , Research Director

The list of big-box chain retailers closing down stores and looking at new ways to better manage their real estate portfolio reads like a “Who’s who” in retailing. Hit hard by ever more aggressive competition from Amazon.com Inc. and other online retailers, consumer electronics chain retailer Best Buy Co. Inc. will close at least 50 of its stores over the next year. Other big chain retailers closing stores lately include Blockbuster LLC, now a unit of Dish Network Inc., Gap Inc., Abercrombie & Fitch Co. and others.

But if more of the big chains are shuttering locations, many smaller niche store merchants ranked in the new 2012 Second 500 Guide still consider their bricks-and-mortar locations and years of up close and personal customer service experience a big advantage in growing sales online.

Consider the numbers.

As a group, Second 500 store retailers are growing sales faster online than the big-box merchants. In 2012, the combined sales of the chain retailers ranked in the Second 500 increased their combined sales about 18.7% to $586.8 million in 2011 from $494.5 million in 2012. In comparison the biggest chain retailers ranked in the 2012 Top 500 grew year over year about 15% to $64.62 billion from $56.35 billion. Second 500 chain retailers are growing other key metrics, including monthly web site visits, more quickly than Top 500 store-based merchants. In 2011 Second 500 chain retailers grew their combined monthly visits 58.5% to 30.2 million, compared with a 2011 growth rate of 16.6% and 1.08 billion monthly visits for Top 500 chain retailers.

Many Second 500 store merchants’ aggressive growth online is thanks to their carrying specialized merchandise not widely available elsewhere, as well as the loyal customer base they’ve honed from years of running a single store or a small network of bricks-and-mortar locations, says Lauren Freedman, president of The E-tailing Group. “Smaller chain retailers can be potentially more nimble than other merchant types because their store customers also like the convenience of having an online presence,” says Freedman. “Their expertise allows them to compete and provide that same level of ‘niche’ service online.”

The fastest-growing chain retailers ranked in the Second 500 included JimmyJazz.com, No. 511 in the 2012 Internet Retailer Second 500, which grew e-commerce revenue year over year about 260% to $14.5 million from about $4 million, and Pharmaca Integrative Pharmacy (No. 939), which posted web sales of $2.1 million in 2011, up 181% from $748,000 in the prior year.

For the first time the Second 500 is available in three formats: print, digital and as part of the all-new and completely updated Top500Guide.com. Information on how to order the fully updated 2012 Second 500 Guide is available here.

Topics:

Abercrombie & Fitch, Amazon.com, Best Buy, Blockbuster, Dish Network, E-tailing Group, Gap, JimmyJazz.com, Lauren Freedman, Pharmaca Integrated Pharmacy, retail chains, Second 500 Guide, Second500

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