Women’s clothing brand Roman Originals has been inundated by calls since the photo became the center of an online debate.
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For consumer electronics chain Best Buy Co. Inc., the growing investment in e-commerce will be accompanied by some paring back of its bricks-and-mortar stores. Over the next four years Best Buy expects to shrink the square footage at some stores, although it hasn't disclosed details. At the same time Best Buy (No. 11), which posted web sales in fiscal 2011 of $2.5 billion, up by 14% from $2.2 billion in fiscal 2010, expects to reach $4 billion in annual e-commerce revenue by as early as 2014.
To reach that goal, which would require annual online growth of nearly 17%, Best Buy over time will expand its online merchandise selection and add new services and digital content, the retailer says. "We plan to expand on our e-commerce success," Best Buy executive vice president Shari Ballard recently told Wall Street analysts at the company's annual investors' day meeting. "Already 60% of Best Buy store purchases are researched online and 40% of online purchases are picked up in stores."
Kohl's Corp. (No. 31) is another chain that's investing heavily in its e-commerce future. The web is also the fastest-growing channel for Kohl's—e-commerce sales grew 51.3% to $743.4 million in 2010 from $491.5 million in 2009. In comparison, total sales increased 7% last year to $18.4 billion from $17.2 billion in 2009 while comparable-store sales increased 4.4%.
Kohl's is investing $100 million to open its third Internet order processing and fulfillment hub this July in Edgewood, Md. With a new East Coast e-commerce pick, pack and ship facility to complement its Internet distribution operations near San Bernardino, Calif., and Monroe, Ohio, Kohl's now has the infrastructure in place to support a fast-growing web channel that the retailer predicts will generate at least $1 billion in sales this year. "I would expect us to achieve $1 billion in e-commerce sales in 2011," CEO Kevin Mansell told analysts on the retailer's recent year-end earnings call. "In order to achieve that goal, we will continue to invest in the business."
While big-box chains like Kohl's and Best Buy recorded strong online gains in 2010, some of the best e-commerce results among Top 500 chain retailers last year came from specialty apparel retailers, especially those that catered to more fashion-conscious and web-savvy younger shoppers. Web sales for Abercrombie & Fitch Co. (No. 56) grew year over year 41.3% to $352.5 million from $249.4 million, while Internet revenue for Chico's FAS Inc. (No. 129) rose 39.8% in 2010 to $137.4 million from $98.3 million in 2009.
In the early days of e-commerce many chain retailers took a wait-and-see attitude toward e-commerce and used the web mainly as a marketing and merchandising tool to support store operations. But as consumers step up their product research and buying online, more chain retailers are pouring money into e-commerce. Belk, for one, is investing $150 million in new e-commerce applications and information technology in order to grow its web channel and use the Internet to drive more revenue across the Internet and stores. In 2011, Belk will upgrade its network of 305 stores in 16 southern states with web-enabled cash registers that will allow sales associates to check inventory across all channels and to complete an order online if a particular piece of merchandise isn't available at the store. "We can invest in the web to make the shopping experience seamless across both of our channels," says Belk senior vice president of e-commerce Ivy Chin.
More chain retailers are investing in mobile commerce and other emerging Internet-based technologies to keep up with competitors, says Paula Rosenblum, managing partner of research and advisory firm RSR Research LLC. But in the future retail chain CEOs will need to think seriously about adding more resources, including possibly cutting back store operations, to grow the web side of the business even faster, says Rosenblum. "People just aren't going to the store as much because the shopping experience is just so much easier and convenient online," she says. "A lot of chains don't need to worry about what's going to happen with their web site going forward because that is going to grow. Their biggest concern will be what to do with a lot of unnecessary store space."
Top 500 catalogers lay aside paper and ink to concentrate more fully on e-commerce
Times have been tough for many of the Top 500 catalog and call center companies. Times also haven't been easy for other Top 500 merchants with large catalog operations as they hasten the transition from a focus on print catalogs to the web. A case in point is J.C. Penney Co. (No. 20). In the mid-1990s, J.C. Penney was able to leverage its big catalog operation to emerge as a substantial web merchant and was the first department store chain retailer to achieve $1 billion in annual web sales in 2007. But times change and now Penney is done using its traditional catalog business to grow e-commerce.
Penney is ceasing to publish its well-known Big Book and 25 other specialty catalogs. The retailer, which grew web sales only 2% to $1.53 billion in 2010 from $1.50 billion in 2009, also is swapping out the older catalog computer systems it used to build its first e-commerce platform. Penney instead will publish more direct marketing pieces such as its 43-page "Little Red Book" and "Matter of Style" publications that showcase current merchandise such as men's and women's fashions available in the chain's 1,107 department stores in the U.S. and Puerto Rico and online at JCP.com.
Penney, under the watch of group executive vice president Tom Nealon, also is implementing a new e-commerce platform from ATG Oracle that will provide the technology it needs to launch more sophisticated online marketing and merchandising programs, including mobile commerce and social marketing. "We knew we had to transition out of the catalog business to much more of a digital format," CEO Myron Ullman told attendees at the Goldman Sachs Retail Conference in New York in September 2010. "We are transitioning from the catalog as essentially a static vehicle to really what we call 'find more,' which is print material that takes the consumer to the Internet or to the store."