“Amazon has become the standard bearer for how to do e-commerce right, and the fact that firms like Toys R Us, Circuit City, Borders, and Target have chosen to partner with them is a clear indication of that,” says Paul Ritter, retail analyst with The Yankee Group. “Couple that fact with the recent site modifications to enhance personalization, and the new virtual credit card offering that will resonate with cash-strapped consumers, and they are well positioned to capture a significant portion of online spending.”

The deals with offline entities, however, not only extend Amazon’s reach into a multi-channel environment, but also allow it do so with mitigated risk. “By transferring much of the financial risk and inventory carrying costs to third parties (Citibank for the virtual credit card, Circuit City for electronics, etc.), they are making strides to improve their margins and enhance their opportunity for achieving pro-forma profitability,” Ritter says.

Amazon was the first major retailing presence on the web and it has never rested on past successes. Because it is constantly innovating, this is the third year in a row that Amazon has made Internet Retailer’s Best of the Web Top 25 Retail Sites list. ‘They are a formidable competitor for many other online retailers,” Ritter says. Back to top

“The web site not only represents our brand, it also makes money on its own,” says Michael Rempell, senior director of AE Direct, which operates the web business. Last year, the direct business generated $20 million, 2% of American Eagle’s $1 billion in sales. “The web provides us with tremendous brand marketing to target our audience of mainly 20-year olds,” he says.

AE Direct’s multi-channel efforts also keep a streamlined connection between its 659 U.S. and Canadian stores and its web site. Rempell says the company makes sure promotions are the same online as in the store—such as giving away free CDs or flip flops with orders.

Compared to other apparel sites, AE.com only just entered the direct-to-consumer business. It built a site in 1998 but only put major efforts into e-commerce in February 2000. So far it’s getting good results. “We’re able to turn out higher conversion rates than a lot of our competition and that shows we have a good overall service,” Rempell says.

Analysts praise the site for its practicality and affordable prices, as well as its ability to target merchandise. “They have done a good job with their visual imagery in lifestyle settings and they have consistent brand marketing,” says Jim Okamura, a partner in the retail practice at the J.C. Williams Group. The site also earns praise from analysts for fulfilling American Eagle’s mission of being a clothier for everyone, not just the upscale or the upscale wannabes. Just as in the stores, the presentation on the web goes counter to the image of catering to well-to-do college kids that its chief competitor portrays, analysts say, and that attracts buyers. “They are stealing share directly from Abercrombie & Fitch,” says Okamura. Back to top

Web sales that fly high while growth in other channels stays tethered to earth got to be an old story among multi-channel retailers this year. But Jos. A Bank distinguishes itself and wins a place in the Top 25 by proving something new: picky buyers of tailored clothes will buy them online if the retailer figures out how to give them what they want.

For the customers of Josabank.com, that’s quality, selection, speedy navigation, the ability to view detail and custom fit. The site, which debuted in 1998, delivers all in its latest iteration which launched last June. It cut check-out from six to three clicks, lightened up pages to speed downloads without paying for content acceleration, and boosted server capacity to handle more traffic. It added zoom to show details as minute as fabric texture and stitching. And since it added a feature that lets shoppers order suit pieces as separates, an incredible 20% of web sales are now in tailored suits.

Bank also is featuring an online assortment of more colorful, fashion-forward items to gain younger customers. And the strategy is working. “Our typical customer is 28 years old and up,” says CEO Robert Wildrick. “Our web custo mer is 2-3 years younger as a starting point.”

Though the company overhauled the site only six months ago, it’s already looking at expanded functions: 3-D modeling, super speed, and technology that delivers tactile information on fabric texture through a special mouse. “Jos. Bank is known by our customers for using only the highest quality fabrics and for having a lot of choices within those fabric categories,” Wildrick says. “We will boost sales if we can educate new customers on the feel of those fabrics.” Back to top

“We have the benefit of being online since 1998 and with that comes an enormous amount of data,” says Kenneth Seiff, CEO. “We can drive the business around what customers want and need. We spent a lot of time from 1998 to 2000 perfecting the logistics of our operations, making sure the site was easy to use, orders were filled and customer service was professional.”

Bluefly today uses a variety of analytical tools to see what customers look at and buy so managers can adjust site merchandise accordingly. This focus has brought in sales. Last October, for instance, net sales were up 67% to $2.7 million from the previous October. In the third quarter revenue grew 48%. And the average order size increased to $144 from $108. “We’re doing a better job acquiring products from designers, we get bigger discounts and we’re becoming a meaningful place for liquidation,” he says.

Changing the marketing mix also helped keep overhead down, Seiff says. In Q3, the company cut customer acquisition costs to $23.73 from $57.45 the previous year by doing what worked best: e-mail marketing and creating portal deals.

Word of mouth also is helping the site. “Bluefly has been very successful establishing itself with the fashion media,” says Duif Calvin, vice president at Scient Inc., New York. “They’ve always carried very good brands—you don’t normally see Prada online.” The site’s merchandising is key to its uniqueness, especially now that it has a following. “Consumers will find a mix of products at prices they can’t find anywhere else,” she says, “which means they’ll find something none of their friends will be wearing.” Back to top

It’s not just Direct Ship, as the service is known, that makes Circuit City a standout in channel integration, say analysts, it’s also the store locator, the ads on the web site, the pick-up and return at the store and the consistent branding. “When it comes to fully integrated, online approaches, they’re there,” says Will Ander, consultant with McMillan/Doolittle retail consultants in Chicago.

Key to making Direct Ship work is to reward sales associates exactly as they are rewarded for in-store sales. “In compensation, we treat the item as if it were sold in the store,” Bowman says. Circuit City ships the item for free to the customer’s home or office.

Circuit City also has integrated channels in the opposite direction: Customers who buy on the web can pick up their purchases at stores. While that’s not all that unusual these days, what makes Circuit City’s offering stand out is that purchases are ready for pickup as soon as 15 minutes after the customer places the order.

To make the channels work together required an inventory system that was visible to both and an organizational structure that has the stores and the web site reporting to a single person. That person is Bowman. “We put a premium on integration with the stores from day one,” Bowman says. “Especially today, a balanced strategy is important for anyone who wants to make money on the web.” Back to top

Delia's has found many ways to keep these young shoppers coming back. “We have a lot of different content features that we weave into the merchandise,” Guillemin says. “For example, we have polls where visitors can vote on outfits like stripes vs. plain, punk vs. athletic, and that helps them choose what fashions they like and what they might buy.” The site features clothing and accessories to decorate rooms and uses content to give visitors ideas on fashion and decorating.

Making sure the customer base remains loyal is a big part of ensuring future sales, especially from a crowd that is for the most part dependent on their parents for money. “The site encourages kids to keep coming back by the content it provides,” says Duif Calvin, vice president in the retail practice at New York-based Scient Inc. “The site doesn’t require a purchase every time,” echoes Guillemin.

Keeping girls interested requires changing the content at least once a week. Developing that interest creates the ongoing relationship most online retailers seek from a customer base. “When the kids save their money or get their allowance and they’re ready to spend they know where they want to go,” Calvin says. “Delia's understands the teen relationship and that strong teen brands become part of a community.” Back to top

Drugstore’s key market of time-starved 25- to 40-year-old women regard drugstore shopping as a chore, says Kal Raman, CEO. Seizing that opportunity, Drugstore.com has made steady progress toward profitability by transforming the chore into online pampering by making it easy to find and buy the latest spa goodies and gift items while stocking up on prescriptions and toothpaste. The virtual shelves support a web strategy Raman calls “upselling the ordinary,” which builds average order size by putting a carefully merchandised assortment of small luxuries and personal care items at shoppers’ fingertips when they go online to replenish the basics. “That’s a smart strategy for Drugstore.com,” says Jupiter Media Metrix analyst Stacey Rich. “It’s moving them into higher margin products.” Drugstore’s average order size is $65, up from $15 when it launched in 1999.

But personal care products and prestige cosmetics aren’t the only reason Drugstore.com keeps growing and just added its 2 millionth customer. Pharmacy remains the foundation of Drugstore’s business; with prices 20% to 30% below retail, prescription drugs constitute 55% of revenues. Smart partnerships have been the other key to survival and growth. “They were one of the first and only of their online brethren to realize they couldn’t just be an online store and survive,” Rich says.

A deal with chain Rite Aid gives it a multi-channel presence and access to Rite Aid’s 10 million pharmacy customers. And partnerships with pharmacy benefits manager CVS and with Amazon.com have helped drive traffic and add customers.

“Our focus from day one has been on taking care of the customers, and we’ve never wavered from doing whatever it takes to win the customer’s heart,” Raman says. “It’s probably the reason we are where we are today.”
Back to top

“EBay has leveraged its brand and in doing that they’ve put together many relationships very quickly,” says David Taylor, research fellow with consultants the Robert Frances Group. “They’ve really managed to put together a wide array of products.”

In an example of the innovative ways eBay is expanding product offerings, it is testing the sale of premium wines with partners Winetasting.com and New Vine Logistics to get more high-end customers. In another, it is launching a loyalty program with Burger King this month. Customers earn points by buying products at Burger King. They use the points to bid on such items as concert tickets at a special Burger King eBay site.

Add to those innovations the launch last year of eBay Stores which allows 20,000 small merchants to sell online, and you’ve got a potent retail presence using a model that few could have conceived of two or three years ago.

And, as the wine and Burger King relationships indicate, eBay is no longer content to sit by and let sellers come to it. It is actively recruiting merchants and manufacturers to its site. To that end, eBay made its debut last fall at COMDEX, the major convention for computer manufacturers and sellers, to lure them to eBay’s marketplace. It even sent President and CEO Meg Whitman to deliver a keynote address. Clearly it was capitalizing on consumers’ willingness to buy computers at eBay—computer sales grew 70% last year to $1.4 billion. On a typical day, 400,000 items are for sale in the computer category.

With its success, eBay seems intent on blurring the definition of online retailing. Back to top

EddieBauer.com was a leader, selling on the web as early as 1994 and opening its own site in 1996. So it’s no surprise that today it’s executing better than almost anyone. Analysts give the company high marks for knowing its audience, offering many ways for shoppers to experience the merchandise and integrating with its other channels, especially knowing which merchandise sells in which channels. “Their years of experience pay off in merchandising,” says Jim Okamura, partner with retail consultants J.C. Williams Group. “They know what sells better on the web vs. in the store or the catalog. Others are still just guessing at it.”

The site reflects Eddie Bauer’s core audience of shoppers who want solid clothing at a reasonable price, Okamura says. “It makes sense to allow mix and match for pieces or for an entire wardrobe,” he says. “The type of customer who shops there is looking for those suggestions. Eddie Bauer is making their lives simpler by editing the choices for them.”

EddieBauer.com has spent the last year refining what it’s done since it went online, says Sally McKenzie, division vice president of interactive media for Eddie Bauer. The company has been making sure the three channels are all tied together, presenting a single image to the customer. “At this time last year, we were dealing with a lot of dot-com deaths,” she says. “This year, the known and trusted brand has emerged as the place consumers want to shop.” Consumers are flocking to the known and trusted brand on the web. Eddie Bauer can only hope that behavior spills over into the real world. Back to top

“The web site has never been a stand-alone activity,” says John Sullivan, senior vice president of Internet commerce for Hallmark. “We do things online to support what we do at retail.” For instance, Hallmark rewards customers who spend $30 or more online with a $10 gift certificate—good only at a retail store. Online customers earn Gold Crown loyalty points, but can redeem them only at stores.

But that’s not to say Hallmark doesn’t take advantage of the power of the web when it can. Last fall, it began offering an electronic gift certificate to attach to an e-mail greeting card. Within 90 days of launch, the combination accounted for 10% of sales at the site. The gift certificates are administered through GiftCertificates.com, which Hallmark bought last year. That site sells gift certificates good at a number of online and offline retailers.

Calvin also gives Hallmark points for logical brand extensions online. “People think of Hall mark in terms of gift giving, so it’s a very natural brand extension to offer flowers,” she says. “But it’s much easier to sell flowers online than in stores.”

On top of it all, the web site has brought incremental business, including orders from outside the country, substantially larger average tickets at the web site vs. stores and twice the male shoppers at the web site than in stores. “Hallmark is successful because they know their brand, they know their customers and they’ve figured out how to tie the two together on the web,” Calvin says.
Back to top

But in the past year, IBM has roared to the top of the e-commerce pack. A re-vamped site with help at every turn and lots of product backed by beefed-up customer support has made IBM.com one of IBM’s revenue engines. With growth of 61% in the first year of the new strategy, the web accounts for 11% of IBM’s revenue. “IBM’s strategy is selling-centric vs. marketing-centric,” says Marty Gruhn, vice president and practice director for researchers/consultants Summit Strategies. “It’s less about product innovations and more about how to use the products.”

But increased sales aren’t IBM’s only benefit. Wit h the addition of ubiquitous help functions and 4 million pages of content, IBM has increased sales without a corresponding increase in costs and has made reps more productive. In fact, a typical call center rep used to talk to a customer seven times before closing a sale; that is down to three. “Reps are making more sales and are more efficient,” Pat Horgan, director of sales initiatives at IBM.com, says. “We’re getting to customers we wouldn’t otherwise get to.”

IBM.com also has led the way in demonstrating how manufacturers can sell direct to customers, Gruhn says. Some manufacturers were afraid of upsetting their retail channels. But, Gruhn says, “Customers want to buy that way. IBM has said, ‘This is how we’re going to do it.’”

IBM also has gets praise for its use of imaging technology. “IBM deserves a lot of credit for adding rich media features that help sell the product in a way that customers may not have thought of themselves,” says Duif Calvin, vice president of the Global Retail Practice of Scient Inc. She cites the easy-open latch of a Notepad computer. “There’s no way anyone looking at this product would notice the latch,” she says. “But IBM’s use of 3-D makes a point of drawing it to the customer’s attention.”

Calvin sums up the site in a way no one would have thought applied to IBM 18 months ago. “It’s very easy to use,” she says. Back to top

Intuitive shopping is the first superlative that comes to mind when observers consider KBToys.com—formerly KBKids.com. “What I love about the site is that they do a fabulous job making themselves an authority on buying toys for a child,” says Keven Wilder of Chicago-based retail consultants Wilder & Associates. “They have the idea center, interviews with a scientist, things to spur your imagination. You can shop by category, age, brand or by special needs.”

This is just the kind of reaction Scott Wilder, vice president of product development and marketing and no relation to Keven Wilder, is looking for from KBToys.com customers. “In 2001, we changed the name and focused our merchandising teams to work more closely with our stores,” he says. The purchase of eToys also helped re-energize the site. KBToys.com re-launched in August and resurrected the eToys name in October. “We all admired what eToys did and it was a tremendous opportunity to re-launch the web site,” he says. Wilder says focus groups showed many parents still associate online toy buying with the eToys brand. KBToys took over the eToys warehouse and fulfillment operation in Blairs, Va., in August. Earlier, it bought the eToys inventory, name, logos, URLs and trademarks.

KBToys also launched a b2b site to sell to smaller retailers, says Scott Wilder. “We don’t get the volume we get in b2c but we’re just starting to advertise in the trade publications and next year we’ll start attending trade shows to attract more business,” he says. Back to top

“Combined with Lands’ End customer service and support, site features at LandsEnd.com take the customer experience to new levels that very few retailers will ever achieve,” says analyst Paul Ritter of The Yankee Group.

The hit parade of fun-to-use new shopping tools, including My Virtual Model, Land’s End Live, Shop with a Friend and My Personal Shopper, has included few if any duds. By making the addition of new features a regular occurrence in spring and fall, LandsEnd.com has trained customers to expect them. That’s made being first out with effective new shopping technology a cornerstone of its brand online, though e-commerce marketing director Terry Nelson says that wasn’t by design. “We take being an innovator and staying ahead of the curve seriously, but it wasn’t part of a grand plan,” Nelson says. “As a cataloger, we already had infrastructure, customer service and distribution centers in place. So we focused our efforts on improving the customer experience online.”

Two features added last year—search and custom fit—are the latest to prove that digging into the customer experience pays off. Lands’ End data showed that 30% of its shoppers locate items by using the search feature rather than navigation tabs. With a more intuitive and logical organization of search results at the front end, supported by new search engine technology from EasyAsk on the back end, LandsEnd.com’s conversion rate and average order value rose “instantly,” Nelson says.

Lands’ End Custom lets online shoppers order custom-designed chino pants online. Lands’ End was pleased enough with early results that it quickly tested customized jeans internally and planned to launch them on Lands’ End Custom in January. “Customers want customization,” Nelson says, “and retailers are going to have to deliver.”
Back to top

“The site offers many features our consumer research indicates are important for online shoppers,” says Paul Ritter, analyst with The Yankee Group. “For example, a swap colors feature is a fairly simple JavaScript technology that uses multiple product shots, but only 10% to 20% of online retail sites offer this functionality.”

That’s not all. The latest version of the web site, rolled out last fall, offers enlarged product viewing that fills the whole screen to showcase minute detail, pared-down navigation that gets shoppers to what they’re after in fewer clicks, and side-by-side comparisons of specifications for its high-performance products, about 10% of its online inventory.

Besides ease of shopping and navigation, Bean wins big for focusing its offering on each customer in a way that makes most sense to that customer by taking into account behavior across channels. “They excel in linking what they know about you across their catalog pages and their web pages,” says consultant Martha Rogers of Peppers and Rogers Group. “They’re much more likely than others to understand you as the same customer across both channels.”

E-commerce director Shawn Gorman confirms that ever-tighter cross-channel integration is a key element of Bean’s continuing success online and off. “A high percentage of our customers use the catalog and reference guide and then use the site as a point of purchase,” he says. “There is a lot of synergy between our catalog and e-commerce channels.”
Back to top

In 2001, Office Depot opened four new international sites on top of the 10 it started in 2000. Even though they all came up within 18 months of each other, those 14 sites are the culmination of years of planning. “Office Depot decided five years ago it wanted a worldwide brand,” says Bruce Nelson, CEO. “Our international strategy was to put web sites where we had the largest presence.” Today, Office Depot maintains web operations in the United Kingdom, Ireland, Germany, Austria, France, Belgium, Luxembourg, Italy, The Netherlands and Japan. Office Depot’s worldwide e-commerce revenue reached about $1.5 billion last year.

Office Depot clearly learned a lot from its U.S. web operation that it was able to export. The U.S. site is well organized and navigation is clear and intuitive, says Anne Brouwer, partner with Chicago-based retail consultants McMillan/Doolittle. The site also has nice touches that are available only on the web, including allowing customers to maintain multiple lists for items they order regularly, items they order sometimes and items they are considering, as well as allowing customers to order by product number. “It’s got some nice value added features as well as a good mix of business solutions and product information,” Brouwer says.

Office Depot, however, still needs to work on integrating its channels, especially coordinating marketing offers across channels and promoting all channels in all channels, Brouwer says. Maybe it can work on that once it conquers the world.
Back to top

The new design hooks customers with its rich web site as effectively as Orvis’s fishing gear hooks trout. Orvis has pioneered such web technologies as 3-D imaging to allow customers to view details on expensive gear like the Battenkill Large Arbor Reel. And lately it has added enlarged photos so customers can see the details of clothing. “Orvis’s online consumer experience is good, with excellent photos and larger views available,” says Paul Ritter, retail analyst at The Yankee Group, Boston.

Orvis is using the web to expand its image, Rogers says. Keeping its branding voice consistent throughout the catalog, advertising and web site was paramount. And that consistency is paying off as Orvis.com evolves into a community-centric model for e-commerce because of its content and links to related web sites, Ritter says. On top of it all, Orvis.com presents great detail without sacrificing speed. Orvis has developed software in-house to keep its web site streamlined so navigation and web pictures move and download quickly. The company developed XML templates, a compressed file format, to allow web designers more flexibility in creating pages and moving images around.

Keeping content moving quickly was a concern when using so many detailed photos. Orvis utilizes several caching companies to accelerate content. “We’ve aggregated 40 different merchant sites and we watch their speeds,” Rogers says. “We are outperforming that aggregate by about 20%.”
Back to top

Byrne’s formula is simple: Scoop up clearance inventory at a cost of retail less 80% and resell it on the web at retail less 60%. But with world-class search capability and page download speed of 1.5 seconds that beats the average of the top 40 online retailers, Overstock hasn’t skimped on boosting looks or site functionality. And it spends practically nothing on marketing.

This year discounter Overstock looks more like its higher-priced online retail competition than ever. It built a warehouse for distribution and logistics and it’s going after new channels with links to auction sites. It recently added predictive modeling technology that tracks users to come up with personalized product recommendations. And Overstock added 1,800 best-selling books in time for the holidays. To keep download speeds fast while handling 7 million visitors a month, Overstock boosted server capacity and bought content acceleration from Akamai last year.

Bryne, a self-confessed “rapacious capitalist,” who gained fame by raiding failed dot-coms for Overstock inventory, has pulled in the claws a bit for one of the site’s latest features. A new department, Artisans of Worldstock, sells handcrafted items from artisans in underdeveloped countries or who have environmental or social causes. Overstock limits net profit to 5% on these sales. But don’t think the boss has gone soft. Because Overstocks’ liquidation infrastructure already moves merchandise in a way that mirrors the artisan market—small, one-off lots that aren’t replenished once they run out—he’s confident the venture will make money as well. Early indications say he might be right. Within five weeks of its September launch, Artisans of Worldstock was driving 2% of all sales. And it’s getting much of Bryne’s attention as he scouts sources from Navajo reservations to Thailand silk cooperatives. “That’s my job now,” he says, “traveling the world and shopping.” Back to top

The ambience that a seller can create on the web is an important tool in communicating a brand, Morgan says. “We know our customers are not just buying online,” he says. “They’re using the site as a shopping resource. It takes a lot of effort to create an online brand experience that lives up to our offline experience.” Analysts agree that Polo has done a fine job of translating its brand online. “Polo is ahead of the curve in looking for creative ways to keep customers returning to their site,” says John Yunker, founder of Byte Level Research and author of a study on fashion web sites. Instead of using flashy technology, Yunker says, Polo has realized that being about more than just clothing gives customers reasons to frequent the site. The “Ask Ralph” feature is a good example of content relevant to the site that creates longer visits and return visits, Yunker says.

But while the site is heavy on ambience, it’s also not light on giving visitors the opportunity to shop. Polo.com features a toll free phone number on each web page, carries the category tabs from page to page for better navigation and even gives visitors the chance to buy the product under discussion in the Ask Ralph section. Morgan declines to reveal sales numbers, but he says Polo.com is selling on the web and creating offline sales. “We’re meeting our expectations,” he says. “Web sales still are a small part of our overall business. But it does the equivalent of one of our best stores in terms of sales. The added advantage is that the online store can influence sales at all our stores because customers come to the site to learn what we’re offering by season and to find stores.” Back to top

“Customers buy brand, whatever the channel, so it’s important for us to have one brand persona across channels,” says Shelley Nandkyeolar, vice-president of e-commerce at Williams-Sonoma Inc. The company’s three e-commerce sites—extensions of Williams-Sonoma cookware, Pottery Barn home decor and Pottery Barn Kids—share an approach that delivers that consistency, says consultant Jim Okamura of J.C. Williams. “They are one of the best for being channel-agnostic,” Okamura says. “They understand people enjoy shopping in their stores and flipping through the catalogs, and they’ve made it consistent across channels, so online you find the same artistic view and presentation of products.”

Though Williams-Sonoma doesn’t break out web sales, Nandkyeolar says they’ve been a fast-growing contributor to corporate revenues, which are drawn from the company’s six catalogs and six retail store chains. “Williams-Sonoma translated many skills online from other channels, such as the way they present merchandise,” says Okamura. “In the vignettes on the Pottery Barn site, for example, the room settings are excellent at creating demand, and a specialty retailer has to be able to create that sense of urgency to buy right now.” It’s the same at the company’s other web sites. At the Williams-Sonoma flagship site, for example, shoppers who clicked on Thanksgiving menu ideas in November found not only suggestions, but also recipes and a presentation of all the products needed to c