Target also leads the pack when it comes to paid search spending, a new report finds.
With 20/20 targeting of their niches, midsized e-retailers are growing the fastest among the Internet Retailer Top 1000.
With its 46% online sales growth, Amazon.com Inc. ranks among the fastest-growing web retailers, as well as the largest by online revenue. But an analysis of the top 1,000 web retailers listed in the Internet Retailer Top 500 and Second 500 Guides shows that overall it's not the biggest e-retailers—apart from Amazon—that are growing the fastest. Nor is it the smallest e-retailers, which are growing off a small base and thus can register large percentage increases with small growth in dollar sales.
In fact, the fastest-growing web retailers are in the 500 to 700 range of the Top 1000, merchants capturing $5 million to $13 million in annual online sales.
How do they do it? For many, the secret is to focus on a narrow niche and provide the widest selection, lowest prices and best service for consumers interested in those products.
Take Coolibar Inc., an online and catalog retailer of sun-protective clothing whose target customer is someone who's been diagnosed with a skin disease. Larger competitors offer some apparel that provides protection from the sun, but they don't focus solely on serving that customer, says Alan Higley, vice president of marketing. "They promote sun protection along with a million other attributes," he says. "Nobody has made an all-out push to promote it except us."
Other relatively small e-retailers are growing by pursuing an immersive strategy like Coolibar's, says Ken Burke, chairman of MarketLive, an e-commerce technology and services firm that works primarily with small to mid-size retailers. "The strategy smaller e-retailers take is to say we have to win," Burke says. "They take on a specific strategy and they're very vertically niched. They master that category and all the search terms around that." He points to Country Curtains, a 53-year-old catalog company and web retailer that sells curtains. Run a Google search for "curtains" and it frequently shows up No. 2 in organic search rankings, ahead of Amazon.com, Target.com, Walmart.com and JCPenney.com.
It's much the same for Coolibar. Search on Google for "SPF clothing" or "sun hats" and Coolibar is among the top results in both paid and natural listings, alongside much larger retailers such as Amazon and Recreational Equipment Inc. While Coolibar grew its web sales 29.4% to $8.1 million in 2010, and is on track for another 30% increase this year according to Higley, those revenue figures are a speck compared to Amazon's publicly reported $34.2 billion in 2010 revenue or REI's $318.5 million by Internet Retailer's estimate.
But Coolibar doesn't have to compete with Amazon in books or electronics, or with REI in tents or hiking boots; it only has to hold its own in sun-protective clothing. And that may be the secret to survival—and success—for smaller online retailers: Focus on a very specific type of product, and use the broad reach of the Internet to find many customers who need or want that product.
It's a strategy that's working for many others besides Coolibar in the 500-700 range of Top 1000 retailers. Those web merchants collectively increased their sales by 17.9% in 2010 to approximately $1.7 billion. This far outpaced the 12.8% growth posted by top 100 e-retailers, excluding Amazon, not to mention the 14.8% growth of all e-commerce sales calculated by the U.S. Department of Commerce.
Because they lack the brand recognition of an Amazon or Walmart.com, these retailers have to attract the attention of online shoppers looking for the products they sell. And that makes it crucial for retailers like Coolibar to show up highly in search engine results for terms related to its sun-protective products. That means becoming experts in search engine optimization, or SEO, the art and science of appearing at the top of natural search results in Google, Bing and other search engines.
Google and Bing give retail sites lots of credit for inbound links from reputable organizations, and Coolibar.com benefits from enviable links from health groups like the Skin Cancer Foundation because of its expertise and product quality, Higley says.
"Our growth has been fueled by search and search marketing," Higley says. "We have a lot of .org and .edu institutions that link to us without asking."
The e-retailer, No. 612 in the Top 1000, takes other steps to raise its search rank. Coolibar packs its site with the kind of original content that earns extra credit from search engines. That includes writing its own product descriptions that highlight both an item's ability to repel the sun's harmful ultraviolet rays and its appealing look. For instance, a description of a women's long-sleeve swimming shirt explains that it can "repel UV rays from reflective water and sand with a flirty ruffled hem and flattering ruched sides."
More original content also comes from almost daily postings to the site's blog, which recently commented on California banning teens from tanning salons and explained why the UV index is an important part of the daily weather report. The site also features tips on avoiding overexposure to the sun, commentary from doctors and personal stories from Coolibar customers.
In addition to helping boost Coolibar.com in natural search rankings, such content helps consumers feel more comfortable that they are shopping with a company that understands their problems, Higley says. "People come to us looking for a solution to their skin problems," he says, "and our content has always been a big driver of our business."
Getting traffic is essential, but so is delivering a shopping experience that makes consumers buy, return to buy again and recommend a site to others. That's the strategy of Gemvara.com, which sells jewelry that shoppers can customize to their tastes. The e-retailer, which launched in March 2010, generated an estimated $8.3 million in web sales in its first year, putting it at No. 605 in the Top 1000.