Retailers shift their ad spending from TV, radio and print ads to digital ads.
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E-commerce also generated the only growth for several chains, including Macy's Inc. (No. 20), Gap Inc. (No. 23), Toys 'R' Us Inc. (No. 37), Saks Inc. (No. 45) and Foot Locker Inc. (No. 52).
- E-commerce made the biggest difference at Macy's. The Internet channel for Macy's grew year over year 19.6% to an Internet Retailer-estimated $1.24 billion compared with a decline in total revenue of 5.6% and comparable-store sales of 5.3%. The growth in e-commerce sales is becoming so important to Macy's that in June 2009 CEO Terry Lundgren told Wall Street analysts that over the last two years Macy's has shifted its annual capital improvement budget away from stores and to the web. "A bright spot in our business is the Internet," Lundgren told analysts. "Over time the new store sites and new mall construction sites are going to take longer to become a reality. In the last two years we have particularly focused on our investment in the dot-com infrastructure."
- In 2009, Gap had e-commerce sales of $1.12 billion, up 8.7% from $1.03 billion in 2008. In comparison, total sales fell 2.3% and comparable-store sales declined 3%.
- At Toys 'R' Us, which has acquired four online brands such as eToys.com through bankruptcy auctions in the past two years, web sales rose year over year by 3% to an Internet Retailer-estimated $515 million while total sales fell 1.2% and same-store sales declined 3%.
- In 2009 web sales for Saks rose 13% to an Internet Retailer-estimated $430.0 million from $380.5 million in 2008. Total sales fell 13.5% while comparable-store sales slipped 14.7%.
- At Foot Locker web sales rose 6.8% to $344.0 million from $322.0 million in 2008, while total sales dropped 7.3% and comparable-store sales decreased 6.3%.
"The web is only going to grow in importance to chain retailers and it's clearly what many of the biggest brands should be making their top priority," says Lauren Freedman, president of consultants The E-tailing Group. "The chains that are making the biggest commitment to the web now will be the ones that are best positioned for growth as the economy rebounds."
In the past, consumer brand manufacturers took a wait-and-see attitude to selling direct over the web to the public, but in 2009 the manufacturers that grew the most online did so by diversifying and launching even more branded web sites. Crocs Inc., the fastest-growing consumer brand manufacturer and an online retailer, now sells dozens of styles of its own footwear on Crocs.com. That product diversity, which Crocs (No. 151) plans to augment this year with more drop-shipping options for other retailers that sell its products, helped grow web sales 103.7% to $89 million in 2009 from $43.7 million in 2008.
Another manufacturer with a rapidly expanding e-commerce business, Jones Retail Group Inc. (No. 219) grew in 2009 by opening a new web store to showcase one of its most recognized brands. Jones, which grew web sales year over year 60.9% to $51.5 million from $32 million, launched an e-commerce store for its Anne Klein brand in April. In 2010, Jones also was making plans to launch ShoeWoo.com, which Jones says will showcase all its shoe brands not previously sold online. "There is great opportunity for growth in the Internet business," Jones CEO Wesley Card told Wall Street analysts on a year-end earnings call. "ShoeWoo.com is going to expose our remaining shoe brands to web selling for the first time."
Many online merchants found various ways to grow web sales in 2009. The fastest-growing Top 500 merchant, Golden Eagle Coins (No. 289), took advantage of rising consumer and investor interest in precious metals to increase web sales 306.2% to $31.5 million last year from $7.8 million in 2008. Another specialty apparel retailer, Express Inc. (No. 144), used the web to appeal even more to its core audience of trendy clothing shoppers in their 20s and 30s. As a result, e-commerce revenue for Express grew 238% in 2009 to $95 million from $28.1 million in 2008.
If there was one group that struggled in 2009 it was catalog companies, where sales, collectively, were down 3.1%. In the early days of e-commerce catalog companies with their direct marketing base were positioned better than many other merchant types to reap the rewards of selling online.
But a number of Top 100 catalog companies' web sales dropped in 2009, including CDW Corp. (No. 9), down 5% to an Internet Retailer-estimated $2.47 billion from $2.60 billion; Musician's Friend Inc. (No. 38), down 3.2% to $513.6 million from $530.6 million; 1-800-Flowers.com Inc. (No. 40), down 14.7% to $498.5 million from $584.1 million; and PC Con-nection Inc. (No. 44), down 9.1% to $468.6 million from $515.7 million. The fastest-growing cataloger was once again Green Mountain Coffee Roasters (No. 96), which increased web sales year over year 49.5% to $166.4 million from $111.3 million.
Web sales at some catalogers such as PC Connection declined as consumers and small businesses reduced spending on personal computers and related information technology. Now for many catalogers the race is on to cut back on conventional direct marketing and invest even more in e-commerce.
Just a few years ago the web accounted for less than one-third of all revenue at PetMed Express Inc. (No. 101), a cataloger and web retailer of pet medicine and supplies. But in 2009 web sales increased year over year by 14.8% to an Internet Retailer-estimated $158 million from $137.6 million and accounted for more than two-thirds of all revenue as the company migrates away from mail and phone orders to e-commerce.
If they are to stay competitive, other catalog companies will need to expedite their online business plans, says Mark Lee, CEO of the Mark Lee Group LLC, a catalog and direct marketing consulting firm with clients that include Crutchfield Corp. (No. 108). "Many catalogers have been battered by rising print and mail costs and that's had a big negative impact on their total operation," Lee says. "But their customers are going more online all the time, so if catalogers want to even stay in the game they have to become just as sophisticated and nimble as everyone else."
More growth ahead
As 2009 ended, it was becoming clear that e-commerce will remain the retailing industry's vehicle for growth. There also are early indications that web sales will grow at a much brisker pace in 2010. First quarter sales for Amazon.com, for instance, grew 45.8% to $7.13 billion and the Q1 MarketLive Inc. and ChannelAdvisor indexes of their customers' online sales were up 14% over a year ago.
Further, the shift to even more mobile online retailing will accelerate. Already more mobile commerce sites are changing how consumers shop using the web. The number of Top 500 retailers with a mobile commerce site that allowed shoppers to find products, read customer reviews and complete a purchase shot up to 53 from 34 in 2008.