May 29, 2009, 12:00 AM

The Top 500 Guide

(Page 3 of 4)

Overseas diversity

American Apparel Inc. (No. 236), the fastest-growing Top 500 consumer brand manufacturer, also counted on diversity to increase its web sales year over year by 55.1% to $39.4 million from $25.4 million. American Apparel, which also operates 260 stores in 19 countries, has spent two years building web stores for shoppers in Australia, Canada, Europe, Japan and South Korea. As a result, international e-commerce sales increased 82.9% to $13.9 million in 2008 from $7.6 million in 2007 while U.S. online sales grew year over year 43.3% to $25.5 million from $17.8 million.

“We can use the speed and efficiency of the web to build a business quickly in a foreign market and that’s helping to diversify our e-commerce sales,” says American Apparel web director Raz Schionning. “Last year was a tough one in apparel retailing and manufacturing, but being able to sell online in multiple countries was a big advantage for us.”

In 2008 as the economy worsened and comparable-store sales dropped, many big chain retailers relied on their e-commerce units to drive business. While comparable-store sales decreased by 1.5% for Charlotte Russe Holding Inc. (No. 464), the fastest-growing Top 500 chain retailer which began selling online only two years ago, web sales grew by 633.3% for fiscal 2008 to $11 million from $1.5 million in 2007.

The web clearly drove sales for most big chains in 2008. E-commerce generated the only growth in sales at several other prominent chains, including Gap Inc. (No. 25), Macy’s Inc. (No. 23), Nordstrom Inc. (No. 32), and Kohl’s Corp. (No. 50).

- In 2008 Gap posted e-commerce revenue of $1.03 billion, up 14% from $903 million in 2007. In comparison, total revenue and comparable-store sales dropped by 7.8% and 12%, respectively.

- At Macy’s, e-commerce sales grew by 28% to an estimated $1.04 billion in 2008 while total sales were down 5.6% and comp-store sales were down 4.6%.

- In 2008, web sales for Kohl’s rose by 58.9% to $356 million from $224 million in 2007. Comparable-store sales at Kohl’s decreased by 6.9% while total revenue dropped by 0.5%.

- The web made an even bigger difference at Nordstrom (No. 32). In 2008, e-commerce sales increased by 8.4% to $686.2 million from $633 million in 2007 vs. a decline in overall sales of 6.2% and same-store sales that dropped 9%.

Overall e-commerce was the one channel that made a difference for many chain retailers-for 31 of the top 50 chains the web grew while total sales declined. But the online retailing industry was hardly recession proof. In 2008, 74 Top 500 retailers had flat or declining sales, compared with 25 in 2007 and just 13 in 2006. Last year only five of 14 merchandising categories in the Top 500-apparel/accessories, computers/electronics, health/beauty, mass merchant and specialty/non-apparel-exceeded or grew at the same rate as the overall e-commerce market. With sales that increased 20% to $35.52 billion, the mass merchandise segment was the fastest-growing merchandise category while the jewelry and flowers/gift segments each grew by 1% to $1.06 billion and $1.46 billion, respectively.

Market shift

As 2008 ended, it was clear that business-to-consumer e-commerce remains the growth engine for the retailing industry. But the tough economy also changed fundamental ways successful retailers will need to run their web business going forward, says Scot Wingo, an eBay analyst, author, and president and CEO of ChannelAdvisor Corp., which helps retailers sell through online marketplaces such as eBay and

“When the market was growing at 25% per year, most merchants looked first and foremost at growing the top line,” Wingo says. “But the recession has put a lot of web retailers just in survival mode. The successful merchants that will make it through tough times and grow are the ones that execute on every part of their business plan and do whatever must be done to maximize their performance.”

The Top 500: Key operating statistics

Industry concentration
The concentration of the e-retailing industry mirrors that of all retailing. The Top 500 e-retailers account for 65% of all online sales, but the top 100 dominate. The top 100 control 55.3% of retail web sales. By comparison the top 100 store-based retailers control about 60% of all retail sales in the U.S., not including automobile and restaurant sales.

Web site traffic
In 2008 the Top 500 retail web sites received 2.17 billion average monthly visits. There are 192 million Internet users in the U.S., who visited an average of 11.3 retail sites per month.

Performance averages
The Top 500 retail sites recorded an estimated 585.1 million separate sales in 2008 with an average ticket across all merchandising categories of $198. Sales conversions based on monthly visits vary widely, ranging from 0.3% to 10% for chain retailers, 0.55% to 27% for catalog/call center operators, 0.27% to 14.5% for web-only merchants and 0.5% to 6% for consumer brand manufacturers.

Percentage of web sales
The sales of the top 100 retail web sites in 2008 accounted for 85.1% of the Top 500 sales, compared with 83.2% in 2007. The top 100 merchants includes: 40 chains, 26 web-only retailers, 28 catalog companies and six consumer brand manufacturers. There were a total of 27 top 100 retailers with annual web sales of $1 billion or higher, up from 21 in 2007

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 Online. That list was supplemented with retailers that Internet Retailer magazine has covered.

Web sales. Whenever possible, web sales listed in the guide came from the company. If the company did not provide sales figures, researchers 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.

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