The online retailer has spent nearly $300 million acquiring three shipping software vendors over the past nine months.
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For 2008, combined e-commerce sales increased by 55% from $25.4 million in 2007 to $39.4 million. That sales jump landed American Apparel on the 2009 Top 500 Guide’s list of fastest-growing e-retailers, and led all consumer brand manufacturers.
Getting there, particularly when the international expansion plan was hatched in 2005, wasn’t easy, Schionning says. In fact, the first step was almost an afterthought. “Our motivation for expanding e-commerce internationally was initially to coincide with retail store expansion,” he says. “As we opened stores in Germany it became an obvious benefit to expand e-commerce to Europe as well.” American Apparel now operates 260 stores in 19 countries.
A different route
Other online retailers have separate sites for other countries with separate data stores, but American Apparel did not want to go that route. “We have business in eight separate countries, so that would be unmanageable,” Schionning says. The company manages is overseas operations from its headquarters in Los Angeles.
One area of global e-commerce that American Apparel is trying to improve on is payments. Through word of mouth the company learned about Netgiro Systems AB, a Swedish payments processor that does business digitally with many European banks and other payers. “We built a single integration with Netgiro and can take advantage of the integrations they have with hundreds of banks,” Schionning says. Netgiro’s U.S. headquarters is in Redondo Beach, Calif.
American Apparel, which generally accepts only credit or debit cards, plans to expand its payment methods to take into account how consumers in other countries prefer to pay.
Japan is challenging, Schionning says, because credit cards are not popular among young shoppers. Instead of paying with credit, an online customer often prints a sales receipt, brings it to the local convenience store and has the cashier ring up the sale. The payment then is transmitted to the e-retailer.
Shipping also presents hurdles. Nearly all fulfillment originates in the Los Angeles facility via consolidated shipments to each region, Schionning says.
A bulk shipment received in England, for example, is broken down and delivered through locally negotiated agreements. In England and Australia, American Apparel works with the government mail systems, and in other countries it uses courier services, he says. A bulk shipment to England can put products in customers’ hands in four to six days, he adds.
Schionning says selling internationally may not make sense for retailers of low-margin goods, such as computers and electronics, but can be profitable for other web merchants. “It’s not as complex now as some might think,” he says. “But really the web site, languages and content are the easy parts. The hard part is logistics and fulfillment.”
The high-growth club
Though a diverse group, these Top 500 retailers shared innovation and new business savvy to drive exceptional growth online in 2008
By Mark Brohan
Last year sales at Amazon.com grew more than five times faster than the rest of the U.S. web retailing market, up by 29.5% to $19.17 billion from $14.8 billion in 2007. The biggest online retailer continues to diversify: It opened a dozen new web stores in 2008 and developed Amazon Remembers, a mobile commerce application that makes it easier for shoppers to use their iPhones and iPod Touch devices to search for products and complete an online purchase at Amazon.com and elsewhere.
Amazon also made key acquisitions in 2008 to grow its digital content business, including AbeBooks.com and audio books retailer Audible Inc. Amazon relied on a worldwide audience to drive its total sales higher in 2008. Overseas sales, which now account for almost one-half of all revenue, grew by 33.3% to $8.93 billion in 2008 from $6.7 billion in the prior year.
Dell significantly enhanced its e-commerce program in 2008 and the effort paid dividends. In 2008, consumer web sales for Dell grew year over year by 15% to an estimated $4.83 billion from $4.2 billion. That’s a big improvement over 2007 and 2006 when e-commerce only grew by about 6% annually. In previous years the web channel lagged as Dell struggled and lost market share to Hewlett-Packard Co. and other personal computer manufacturers.
But in 2008 Dell rejuvenated Dell.com with new programs such as the Dell Download Store, an online software site that lets shoppers purchase and download popular software titles at 10% or more below list price from 12 publishers including Microsoft Corp. Last year Dell also launched Dell.com/Bestofweb, a one-stop shopping portal that features a variety of social networking tools, digital content and daily web deals.
It was iTunes that kept Apple’s web sales singing in 2008 and the primary reason e-commerce revenue increased 34.9% from an estimated $2.7 billion in 2007 to $3.64 billion in 2008. The iTunes store now stocks an inventory of more than 10 million songs, 30,000 TV episodes and 2,500 films. Apple made several key improvements to iTunes last year such as adding an application that assembles compatible tunes based on a user’s existing digital music library and selling new movie releases from major film studios on the same day as their release on DVD.
Apple also changed its pricing and made many songs available for 69 cents, priced others at 99 cents, and sells hits and new releases for $1.29. Music from the four largest record labels-EMI Group, Universal Music Group, Sony BMG and Warner Music Group-now are offered on iTunes without digital rights management restrictions that limit how many times music can be copied and the devices on which it can be played.
Costco.com grew sales by 41.7% to $1.7 billion in fiscal 2008 from $1.2 billion in fiscal 2007. Costco members are upscale web shoppers. About 74% of Costco.com’s customers are college graduates with annual household income of more than $78,000 and 90% are homeowners. 50% of customers who shop online also are executive members who pay a higher annual fee for perks such as annual rewards and lower prices on services such as check printing, auto financing and long-distance phone service.