Target and Toys R Us posted overall sales declines during the holidays.
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Overall the 45 consumer brand manufacturers ranked in the Top 500 Guide grew by an average 26.1% in 2005, an impressive figure given that many manufacturers, concerned about alienating their retailers and distributors, were slower to embrace business-to-consumer e-commerce than chain retailers, catalogers and web-only merchants.
While many manufacturers trailed the market in e-commerce business development, however, companies in another segment, catalogers, were among the very first to leverage direct marketing and fulfillment expertise and begin selling on the web. As a result, many catalogers, including L.L. Bean Inc. (No. 22), now list the web as their biggest sales channel. In 2005 many individual catalogers continued to post impressive numbers, though catalogers as a whole only accounted for 14% of total 2005 web sales.
In 2005 CDW was the largest catalog/call center operator listed in the top 100 and grew its online sales 16% to $1.8 billion. It was followed by: QVC (No. 14), up 38% to $1 billion; L.L. Bean (No. 22), up 25% to $653.8 million; Avon (No. 25), up 24.1% to $566.5 million; PC Connection (No. 33), up 38.7% to $375.5 million; 1-800-Flowers.com Inc. (No. 35), up 17.4% to $361 million; and Scholastic Corp. (No. 42), up 22.7% to $270 million. The web sales for L.L. Bean, and Avon are Internet Retailer estimates.
Other catalog and call center companies turning in a solid performance last year include: Musician’s Friend Inc. (No. 50), which posted web sales of $211.9 million, an increase of 25% over 2004; and Northern Tool + Equipment Catalog Co. (No. 75), with an increase of 26% to 2005 e-commerce sales of $131 million.
As in previous years, Internet Retailer’s 2005 annual ranking of the top retailers based on annual web sales finds that many companies with an established online marketing and merchandising base continue to post solid gains year in and year out. The Top 500 Guide also has identified a number of fast-growing companies, which includes a surprising mix of brands both old and new.
For example, one of the few bright spots Blockbuster Inc. can point to these days is e-commerce. Blockbuster (No. 70) has struggled financially for several years as it copes with changing consumer demand for leisure and entertainment products and an overall industry decline in movie-related sales.
In 2005 Blockbuster’s total revenue slipped 3.1% to $5.86 billion from $6.05 billion in 2004. But Blockbuster also is reporting that revenue from its start-up online movie rental business grew 17-fold in 2005 to $146.7 million from $8.6 million in 2004, making it the fastest-growing online retailer in the Top 500 Guide. As a result of making e-commerce a bigger part of its multi-channel strategy, it now represents 3.5% of the company’s total movie rental revenue vs. just 0.2% in 2004.
But Blockbuster’s e-commerce program is under fire. In April Netflix Inc. filed a patent infringement suit against the company and asked a federal court to shut down Blockbuster’s 18-month-old online rental service. The lawsuit also seeks unspecified damages. Blockbuster says the lawsuit is without merit and that it will “defend itself vigorously.”
Generally speaking, the Internet enables retailers of all sizes with a viable business plan the opportunity to generate record sales early on. Housewares and home improvement site The Inside Store, for instance, had the second fastest growth rate in the Top 500 Guide. The company (No. 476) saw its 2005 sales rise 477.8% to $5.2 million from just $900,000 in 2004.
Looking ahead, however, most retailers plan on settling for more realistic results. With U.S. Internet retailing sales historically growing at an average 20% to 25% annually, the industry is on track to achieve total sales of about $136 billion in 2006, which would be a 25% increase over 2005’s $109 billion.
The Top 500: Key operating statistics
The concentration of the e-retailing industry mirrors that of all retailing. The Top 500 e-retailers account for 63% of all online sales, but the top 100 dominate. The top 100 control 54.5% of retail web sales. By comparison the top 100 store-based retailers control more than 60% of all retail sales in the U.S., not including automobile and restaurant sales.
Web site traffic
In 2005 the Top 500 retail web sites received 1.42 billion average monthly visits. There are 147 million Internet users in the U.S., who visited an average of four retail sites in 2005.
The Top 500 retail sites recorded an estimated 523.9 million separate sales in 2005 at an average ticket of $118. Sales conversions based on monthly visits vary widely, ranging from 0.45% to 23% for chain retailers, 0.39% to 23.5% for catalog/call center operators, 0.10% to 31% for virtual (web-only) merchants, and 0.75% to 20.2% for consumer brand manufacturers.
Percentage of web sales
The sales of the top 100 retail web sites in 2005 accounted for 54.5% of the total corporate sales of the retail chains, catalog companies and manufacturers that operate those sites.
Researchers contacted hundreds of retailers over five months. The starting point of data gathering was the rankings of retailers’ web traffic from comScore Networks Inc. and Nielsen/Net Ratings Inc. That list was supplemented with retailers that Internet Retailer has covered.
Web sales. Whenever possible, web sales listed in the guide came from the company. If the company did not provide sales figures, Internet Retailer estimated sales based on traffic and an assumed conversion rate and average ticket for that retailer’s category-as well as on analyst interviews-to formulate estimates. Retailers were given the opportunity to respond to estimates.