November 1, 2011, 12:00 AM

Sheltered from the storm

Supply and demand at work: Strong demand for experienced e-retail executives drives up their compensation.

Lead Photo

No executive even comes close to Mindy Grossman this year when measuring the compensation packages awarded by the leading publicly traded online retailers.


The CEO of TV and web merchant HSN Inc. earned $12.1 million in 2010, according to a U.S. Securities and Exchange Commission filing, an increase of nearly 200% from 2009. She can give much of her thanks to the almost $8.7 million in stock and option compensation granted by her employer.

The economy may continue to sputter for most consumers, but for some of the country's top e-commerce leaders—who are, after all, drawing more retail dollars away from stores—a recovery appears well along. The highest levels of e-commerce management enjoyed double-digit compensation gains in 2010, thanks in large part to the increasing value of stock awards and what some experts call more competition for the top talents in online retail.

"There's been a lot of movement at the executive level among large, publicly traded retailers," says Wendy Weber, president of executive recruitment firm Crandall Associates Inc. "Salaries are dramatically escalating at the C-level and senior vice president level."

Part of the escalation is being driven by retailers late to e-commerce trying to make up ground, she says. As well, she adds, some retailers hope to boost their overall revenue via e-commerce to make up for flat or declining bricks-and-mortar sales. In fact, of the 53 retail chains in the Internet Retailer Top 500 Guide that report comparable-store sales, online provided more sales growth for 48 of those merchants than did stores. And the Top 500 web-only merchants enjoyed sales increases of 31% in 2010, compared with the 18% average for all of the Top 500 retailers.

Pay trends

Little wonder then that most top executives at the 23 top publicly traded online retailers raked in the dough this year. Internet Retailer measured their compensation by analyzing their companies' most recent proxy statements, the annual filings of public companies detailing executive pay; those statements included compensation for the most recent year as well as for the previous year (fiscal year and calendar years don't always match up). The positions included in the review include top leaders such as CEOs, presidents and chairmen, along with chief operating officers, chief marketing officers, vice presidents and related titles.

Total 2010 compensation for the 97 executives included in this year's review averaged almost $1.69 million, up 38.5% from $1.22 million last year, according to the most recent proxy statements. Base pay averaged $401,181, up from $371,661 in Internet Retailer's review last year.

The average total pay package for the most senior executives—that is, positions with president, CEO and chairman in the official job title—stood at $2.16 million for 2010, up 22% from $1.77 million the previous year. On average, compensation related to stocks and options accounted for most of the meat in those pay packages—$1.94 million, or 89.8%. Take away the relatively high-earning Grossman from the equation and the percentage drops only to 87%. The average base salary for all those positions, including Grossman's, was $505,227 for 2010.

For CEOs only, the average pay package for 2010 was $2.52 million, up 27% from $1.98 million the previous year, according to this year's proxy statements. The average base pay was $529,892.

Chief operating officers, meanwhile, earned an average of $1.53 million in total compensation in 2010, up nearly 30% from $1.18 million in the previous year. The average COO base salary was $352,158 in 2010. Compensation related to stocks and options accounted for 23% of the average COO pay package, with bonuses and other compensation—this often includes 401(k) payments—making up the rest.

For other C-level executives at publicly traded e-retailers—this includes chief marketing officers, chief product officers, chief technology officers and others—average total compensation in 2010 hit $1.46 million, up 16% from $1.26 million the previous year. The average base salary was $452,900, and compensation related to stock and options accounted for 88% of the average pay package for this group.

High achievers

Grossman, though she led in total compensation, did not book the biggest pay package gain in this year's review. That prize belongs to Thomas Szkutak, senior vice president and chief financial officer for Inc., the world's largest e-retailer. His 2009 compensation amounted to $163,200. Thanks to nearly $6.47 million in stock- and option-related pay last year, his 2010 compensation skyrocketed to $6.63 million, an increase of 3,962%. His colleague Diego Piacentini, Amazon's senior vice president of international retail, enjoyed a 2,800% increase, also thanks to stocks and options. Piacentini's compensation for 2010 was about $6.70 million, of which only $175,000 came from his base salary.

But not every online retail executive took home more money this year. Some executives at Inc, Inc. and Inc. experienced double-digit decreases in their pay packages, according to the 2010 proxy statements. The average decrease for executives at those retailers ranged from 51% to 75%.

For and Vitacost, the pay cuts followed steep drops in stock prices—each company's shares lost roughly half their value in 2010. In addition, the NASDAQ exchange dropped Vitacost from its listings in December 2010 because of compliance issues; the stock resumed trading on NASDAQ in June 2011.

Hardest hit was Sonya Lambert, who was Vitacost's chief marketing officer. Her compensation decreased to $209,408 from $839,615. (Lambert was replaced in August by former Gilt Groupe Inc. chief marketing officer David Zucker.) At, CEO and director David Zinberg—who had the largest compensation gain in last year's review—this year had a 60% decrease, to $506,340 from $1.26 million. The drop reflects the stock compensation he received last year but did not get this year.

Bright prospects

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