The online retailer has spent nearly $300 million acquiring three shipping software vendors over the past nine months.
With women now dominating online shopping, it comes as no surprise that apparel is one of e-retailing’s fastest growing categories.
Chanel suits or boxer shorts? Embroidered satin evening slippers or kids’ canvas sneakers? Party dresses or polo shirts? After a slow start that left sales languishing far behind those of standard-issue goods such as books and CDs, the needle is finally moving on online apparel sales.
According to Ernst & Young, apparel ranked fourth among products purchased online last year, outstripping sales of consumer electronics, toys and videos. Several sites in the top 3% of favorite shopping destinations in 2000 didn’t even register in Ernst & Young’s survey the previous year. “Consumers express quite a significant potential demand when you ask them about purchase intention and their desire to buy clothing online,” says Peter Stanger, vice president and head of Boston Consulting Group’s b2c topic area, North America.
Though growing, apparel sales online today still are but a fraction of what they could be. Of the estimated $301 billion in clothing sold across all channels in North America, online sales represent only about 0.7%, according to the Boston Consulting Group. Jupiter/MediaMetrix estimates 3% of clothing sales will be online by 2005. “It’s a slow channel shift,” says Jupiter Analyst Heather Dougherty. Nonetheless, even sales that sound as small as 3% would amount to
$9 billion of today’s clothing sales-and that’s as much as consumers spent during the last holiday shopping season.
But there’s apparel, and then there’s fashion. While one is obviously influenced by the other, they’re not one and the same. Specialty boutiques can do a brisk business in hard-to-find goods or niche markets, but scalability is key to racking up big sales online. Web retailers looking for big numbers aren’t going to achieve them by selling the occasional Chanel suit. Collectively speaking, shoppers offline buy a lot more khaki pants than they do Armani jackets, so it’s no surprise that as apparel sales rise online, buying patterns mirror those in the offline world.
That underscores the biggest opportunity for apparel sales online, at least for now: mainstream basics with non-fussy fits. “With all due respect, the money to be made is not in Calvin Klein’s collection,” says Carolyn Topp, an associate director in business strategies in the consumer industries group at Ernst & Young.
Basics lead the way
Just look at the favorite apparel-focused sites of frequent apparel buyers-defined by Ernst & Young as online shoppers who spent upwards of $600 on apparel online last year. JCPenney.com was tops in that group, with more than 20% of frequent apparel buyers naming it as one of their three favorite destinations for shopping on the web across all product categories. Spiegel was next, named as a favorite by 11% of shoppers, followed by QVC.com at 8%; and Gap.com, EddieBauer.com, LandsEnd.com and Sears.com, which all came in at around 7%. “This isn’t high fashion,” Topp points out. “It takes trend, buzz and a very sophisticated level of customer service to sell high fashion, including a point of view that’s more than saying ‘I’m a funky customer.’ The technology online hasn’t caught up to that yet. In my view, profiling (of customer preferences) online isn’t where it needs to be to sell that kind of fashion-but it will be.”
Lands’ End is already there. It doesn’t sell high fashion, and it’s finding that personalization tools work just fine in boosting sales of the casual, sports and business wear it features. In November, Landsend.com added a My Personal Shopper feature, a search engine that uses a shopper’s preferences to build a profile that can be used in future visits. Within two months, the average online order value was 10% higher for site visitors using the personal shopper feature than for those who didn’t. And the conversion rate was 80% higher on personalized recommendations issued through the shopper than it was for other, more generalized recommendations, such as those in the site’s e-mail newsletter.
Industry watchers cite a basketful of reasons for the recent upward trend in online apparel sales. One is the spillover effect: shoppers who have become comfortable purchasing books, CDs and other commodity items online are extending their wallets to other products. In addition, 60% of online shoppers are now women, and 59% of that group are married, often making apparel-buying decisions for the household. That group brings its brand and store loyalty from the offline world when it shops online. “Brand is king,” Topp says. “A lot of the pure-plays fell out last year, giving way to the multi-channels. That means the brands that shoppers already know and trust are online in a more prominent way.”
But until web retailers really crack the nut on the issues of remote sizing, color and texture depiction-and deal with the shipping and returns issues that put customers off-shoppers venturing into apparel buying online are embracing less expensive and less differentiated items of apparel. That’s one reason kids’ clothing is moving online, says Joel Barnett, director of category management at Los Angeles-based BizRate. “Kids’ sizes are more approximate-they’ve got to fit in fewer places than adult sizes,” he says. A number of web merchants have expanded into children’s clothes in the past 12 months. Among them is EddieBauer.com whose Eddie Bauer Kids line launched last October as an online only business, the first time the company has launched an online exclusive. “Our customers have been clamoring for kids’ clothes for years,” says an Eddie Bauer spokeswoman. She won’t reveal sales figures, but the line has already generated a response that has the company considering spreading kids’ apparel to its other channels.
The march of shoes
Because they’re low-risk purchases for consumers, re-orders of items of apparel also are helping to fuel the increase in online clothing sales. “Shoe sales have been increasing in the past 12 months, but it’s in certain categories, like re-order of men’s athletic shoes,” Barnett says. “And if you look at categories like men’s underwear, that’s a re-order business. Shoppers know the product because they already have it.” Ditto for women’s underwear. “Victoria’s Secret does well online partly because most people know their size and what they already have,” Dougherty says.