Mattress Firm takes on delivery and setup services for mattress buyers on Wayfair.com.
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Big get bigger
Web-only retailers grew the fastest but it's clear that consumers gave the most business in 2009 to the merchants with the biggest brands: the Top 100 retailers. Last year the sales of the Top 100 e-merchants grew 9.1% to $108.93 billion from $99.8 billion in 2008. The biggest 100 also accounted for 86.2% of sales in 2009 compared with 85.8% in the prior year.
By contrast, the combined revenue of the Top 500's 100 smallest merchantsÑcompanies with annual e-commerce revenue of $10 million to $17 millionÑincreased by only 2.2% to $1.42 billion from $1.39 billion in the prior year. The smallest 100 merchants also represented just 1.1% of all Top 500 sales, compared with 1.2% in 2008.
In 2009 some of the biggest Top 100 retailers grew by going after new segments of web shoppers while others continued to invest in better technology, product development and new web site features. Staples Inc. (No. 2) grew web sales 27.3% to $9.8 billion from $7.7 billion and spent part of 2009 going after more technology decision makers at big companies and small businesses.
Staples, which controlled about 56% of the Top 500 online office supplies category in 2009, in the fall rolled out Staples Technology Solutions, a new e-commerce unit that delivers business-to-business products and information technology services to small and medium organizations and Fortune 1000 companies.
With a bigger and more integrated e-commerce base, Staples grew its Internet sales last year while online revenue declined for its close competitors. Sales at Office Depot Inc. (No. 5) fell 14.6% to $4.1 billion and 10% to an Internet Retailer-estimated $2.77 billion for OfficeMax Inc. (No. 7).
In previous years when the U.S. e-commerce market boomed, web retailers found it easier to attract new customers and grow. But in tougher times, the Top 100 retailers that grew the fastest last year did so because they focused on their best online customers and generated sales by offering lots of merchandise, plenty of deals and a better web shopping experience.
For instance, by offering more affordable merchandise from well-known designers and celebrities, Kohl's Corp. (No. 43) clicked even more with its core shoppers of women ages 25 to 34 and increased web sales 38% to $491.5 million in 2009 from $356 million in 2008.
Another retailer that grew by offering a superior web shopping experience as well as must-have consumer electronics and gadgets was Best Buy Co. (No. 10). While the combined web sales of all Top 500 computer and electronics retailers grew only 4% to $23.80 billion in 2009, e-commerce revenue for Best Buy increased year over year by 20% to an Internet Retailer-estimated $2.45 billion from $2.05 billion.
BestBuy.com grew last year because it had the affordably priced cell phones, notebooks and flat-screen TVs consumers wanted most. Best Buy also gave its best web shoppers more reasons to keep shopping BestBuy.com by updating its online loyalty programs with features that provided members with personalized offers based on their preferences, better reward certificates in electronic form, and access to more members-only online communities and forums.
While some Top 100 retailers posted strong sales, not every big web merchant grew last year. Web sales at Costco Wholesale Corp. (No. 15) declined 5.9% to $1.6 billion from $1.7 billion as the tougher economy caused even Costco's more affluent online shoppers to rein in their spending on big-ticket items. Other Top 100 retailers whose e-commerce sales dropped last year included: Dell Inc. (No. 3), down 6.2% to an Internet Retailer-estimated $4.53 billion from $4.83 billion; Liberty Media Corp. (No. 11), which includes QVC.com, down 13.9% to an Internet Retailer-estimated $2.38 billion from $2.76 billion; W.W. Grainger Inc. (No. 19), down 5.5% to $1.37 billion from $1.45 billion; and Williams-Sonoma Inc. (No. 26), down 8.7% to $943 million from $1.03 billion.
While web-only merchants had the biggest increase in online sales across all categories, chain retailers and consumer brand manufacturers also posted higher combined web sales. Top 500 retail chains grew collective web sales 6.6% to $49.80 billion from $46.71 billion. Top 500 consumer brand manufacturers increased their combined e-commerce sales 3.8% to $15.30 billion from $14.74 billion. Only Top 500 catalog companies posted a drop in sales last year, declining 3.1% to $18.32 billion from $18.91 billion in 2008.
Among most Top 500 retail chains it was clearly the web and not stores that produced any growth in sales last year. In 2009, it was the specialty apparel merchants, especially those that catered to more cost-conscious and web-savvy younger shoppers, that posted some of the best e-commerce results among chain retailers. Web sales for Aeropostale Inc. (No. 118) grew year over year 48.1% to $129.0 million from $87.1 million while Internet revenue for The Buckle Inc. (No. 217) rose 45.3% in 2009 to $52.3 million from $36.0 million.