E-retailers must focus on their specific goals and examine a vendor’s reputation and market expertise, not referrals.
Take a close look at all the data in the new Top 500 Guide, and you’ll soon understand why we produce such a massive data book on a segment of the retail market that accounts for only 6.3% of total retail sales.
The just-published, 448-page 2008 Edition of the Internet Retailer Top 500 Guide weighs two-and-a-half pounds. It is packed with data on e-retailing in America, more information on e-commerce than is available anywhere else.
Why do we produce such a massive data book on a segment of the retail market that accounts for only 6.3% of total retail sales? Take a close look at all the data in the new Top 500 Guide, and you’ll soon understand why. It’s because e-retailing is taking share away from store retailing and heralding the end of the catalog age. The 500 largest e-retailing enterprises, which are profiled, ranked and performance measured in the Guide, grew 22% last year to a total of $102 billion.
Why measure them so closely? For one thing, they account for 61% of the entire e-retailing market. For another, their growth rate was the same as the entire e-retailing market. By comparison, stores (excluding gas stations and auto dealers) grew their total sales by only 3.12%-a paltry quarter of one percent after inflation. If heads of retail chains are not taking aggressive actions to respond to these numbers-and many are not-their boards should replace them. Keep in mind, these numbers are part of a trend that has been documented by this magazine and others for nearly a decade.
When you examine various segments of retailing, as the Top 500 Guide does, it is clear that online merchandising is on its way to becoming the dominant form of retailing in some of them. Michael Dell told Detroit auto executives a few years ago that cars would one day be configured and sold online the way his computers are. Last year, fully 25% of all computers and electronics were sold on the web, as online sales in this category grew 18% while computer and electronics stores registered a meager 3.4% gain. The office supply market is going through an even more dramatic conversion to the web. Last year, 37% of all office supplies were sold online. Led by the top three office supply chains-whose CEOs obviously get the message-the web-based office supply market grew 14% while office stores grew at only one-quarter of that rate. Makes you wonder why they’re still building office supply stores.
And then, of course, there’s the book, CD and DVD business, where online retailing was born. That retail market grew online by 32% last year, thanks in part to Blockbuster’s belated drive into this market (its online sales more than doubled last year). Store sales in this segment declined 3%. It’s hard to measure the online share of the book/CD/DVD market, because so much of the online business is done by Amazon.com, Apple.com and other broader online marketers who do not break out sales by segment. Still, there are few people who see any future for CD and DVD stores and as for bookstores, well, they better sell more coffee and scones.
If you think these are isolated cases of naturally web-prone retail segments that are shifting away from stores, take a look at apparel, the bread and butter of the non-food store market. Last year, apparel web sites grew 24%, despite the fact that skeptics once said you can’t sell apparel online. Try telling that to department store and apparel store chains who watched their store sales grow at only 2.4%-less than the rate of inflation.
So, what’s the one message of the Top 500 Guide? I think you can figure that one out without me telling you.