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But the study reveals a surprising collective online market share for the two other types of players in the e-retailing space-virtual (web-only) merchants and consumer brand manufacturers. For a group that was given up for dead soon after the dot-com bust that took down such high-profile pure plays as Webvan Group Inc. and Kozmo.com, the virtual merchants which survived the shakeout are well represented in the Top 300 ranking, accounting for fully 24% of total Internet sales measured in the Top 300 research study. Consumer brand manufacturers, led by big PC makers Dell and Hewlett-Packard Co. (the fourth largest e-merchant) and by consumer electronics giant Sony (ranked sixth), operate retail web sites that account for 20% of the online sales of the Top 300. But not all manufacturer sites in the survey are those of electronics producers. The retail web sites of shoe makers, such as Reebock (ranked #84) and Nike (#96); greeting card makers, such as Hallmark (#67) and American Greetings (#117); and even chocolatiers, such as Hershey (#202) Godiva (#243), all made it into the Top 300.
With one obvious exception, the Top 300 retail sites proportionately represent the product make-up found in the broader retail market. That exception is food, the category Webvan tried but failed to revolutionize. Since then, food retailing has become the backwater of online merchandising. Although 14 food companies have sites in the Top 300, together they account for just 2% of total web sales for the group. Only three of those are owned by supermarket chains, including Albertsons (#149), Safeway (#154) and the Peapod.com subsidiary of Royal Ahold (#51). By contrast, 26 supermarket and convenience store chains rank among the top 100 store-based retail chains, and together account for 10% of all retail sales in the U.S.
Looking below the leading web site in each category provides a telling analysis of how traditional merchants fare on the web relative to their traditional offline competitors and how much emphasis different multi-channel merchants give to the online channel. The world’s leading retailer-Wal-Mart Stores Inc.-is a prime example. The Arkansas-based giant revolutionized retailing in the 1970s and 1980s largely by relying on state-of-the-art retail systems that greatly reduced costs-savings it passed on to consumers, whose patronage allowed Wal-Mart to leapfrog Sears, Roebuck and Co., Kmart Corp. and J.C. Penney Co. Inc. in store sales to become the most imposing store-based retailer in history with $256 billion in sales in 2003, nearly four times the volume of second-ranked Home Depot Inc. Yet, Wal-Mart has been unwilling or unable to establish the same retail sales dominance on the web.
While Wal-Mart.com ranks 11th among the Top 300 with $723 million in online sales, Sears is the country’s seventh-largest e-retailer with $1.2 billion of web sales and Target is the tenth-largest with $907 million of web sales. Wal-Mart’s relatively weak performance on the web is perhaps best seen by analyzing how its web sales compare to its overall retail sales. It gets a paltry 0.28% of its total sales on the web, the lowest percentage of any of the nation’s top five general merchants. By comparison, Sears generates 2.9% of its sales from the web, Target gets 2.1%, Penney pulls in 1.86% and Kmart gets 1.8%.
Measured in this manner, the most effective web merchant among the big multi-channel retail chains is Office Depot, which generates a commanding 23% of total sales from its web operation. Its major competitor in the office supplies category-Staples-generates 18% of its total sales from the Internet. These office supply chains lead all store-based merchants in terms of percentage of sales from the web, further illustrating the natural fit between the web and products for the office. Interestingly, Office Max, which competes in the same market as Office Depot and Staples, does not benefit as much from that category’s affinity for the Internet: only 10% of its sales come from the web.
While the office supply chains lead other national store-based retailers in terms of their percentage of web sales, a growing number and variety of big store-based chains now get more than 5% of sales from their web operations. The leading bookstore chain, Barnes & Noble, gets 7% of its total sales online; housewares chain Williams-Sonoma Inc. generates 12% of its sales from the web; Guitar Center Inc. gets 11% of its sales from its MusiciansFriend.com web site; and J. Crew Group Inc. and Sharper Image Corp. each get nearly 15% of their sales online, reflecting the direct-selling expertise that comes from their roots in the catalog business.
Neiman Marcus leads
But the store-based retailer that turns in the most surprising performance online is the carriage-trade leader-Neiman Marcus Group Inc. Reflecting its efforts in continually upgrading its site and its strategy of using the web to extend its well known brand in markets where it has no department stores, Neiman Marcus last year generated 7.5% of its sales from the Internet. No other national department store chain comes close to that performance. Indeed, the second-best traditional department store in terms of web sales percentages is Saks, which now gets 2.6% of its sales on line and is belatedly attempting to emulate the online performance of its arch rival in the high-end department store market.
The other major market where the big chain stores have done well on the web is consumer electronics, but here as elsewhere, there are major differences in the web performances of competing chains. Best Buy Co. Inc., whose web site is the ninth largest in e-retailing, gets 3.8% of its sales online. Circuit City Stores Inc., (ranked 18th online) does even better, with 4.5% of its revenue coming from the web. Contrast this performance with the original consumer electronics specialty chain-Radio Shack-which generates only 1.4% of its sales online.