STORES Favorite 50
Everyone has a favorite online retailer and, judging from STORES’ Favorite 50 list for 2008, a lot of people have the same favorite . . . Amazon.com.
The Seattle-based king of the Internet jungle is the world’s largest online retailer, with sales of $14.8 billion last year and an estimated 6 percent share of this growing market. Being the biggest doesn’t always equate with popularity, but it certainly does in this instance. For the second consecutive year, Amazon.com tops this exclusive list of favorite online retailers compiled by BIGresearch.
Amazon.com also dwarfs the competition in terms of scale and innovation —factors that loom large when it comes to luring shoppers to the site and encouraging them to return again and again. In the last 12 months, a steady stream of revenue-building projects has been rolled out.
Last November, Amazon.com introduced Kindle, an electronic book reader. At the start of the year, the currency converter debuted, allowing international customers to purchase in local currency. Next came the launch of TextBuyIt, making it possible for customers to make purchases using text messaging.
Spring marked the release of “Daily Deals” and “Friday Five,” ongoing promotions offering deep discounts on Amazon MP3. And within weeks Amazon.com acquired Fabric.com and AbeBooks.com. Last month, the online giant opened a motorcycle and ATV store, and word has it that customers will soon be able to buy wine there, too. Is it any wonder company executives expect to reach $20 billion in revenues this fiscal year?
Customers’ second favorite is eBay, the San Jose-based online auction site, followed by Walmart.com, the e-commerce extension of the world’s largest bricks-and-mortar retailer. For eBay, the past year has been one of change, with Meg Whitman stepping down and new CEO John Donahoe shaking things up a bit. At Walmart, it’s about a continued ramp up of new products – with more than a million now available online – and continued improvements in the inventory management processes that enable online buyers to either pick up in the store or have it shipped directly to their homes.
Rounding out the top 10 online favorites are Best Buy, JCPenney, Target, Google, Overstock, Kohl’s and Sears.
Although shoppers have grown increasingly cautious about their spending in the last year, online retail sales remain a bright spot. Forrester Research retail analyst Sucharita Mulpuru reports that e-commerce sales (excluding travel) totaled $174.5 billion in 2007, up almost 21 percent from the year before.
Online sales growth has slowed a bit this year, yet Mulpuru is forecasting a 17 percent increase and estimating that sales will top $200 billion. In addition, she is looking for online retailers to add more than $30 billion a year in sales in each of the next five years. By 2012, Mulpuru expects non-travel-related online sales to equal 11 percent of total retail spending – nearly double last years’ 6 percent share.
While the sales pace has cooled a bit, this channel continues to best bricks-and-mortar retailing. In fact, some retailers admit they’d give their right arm to be able to post 5 to 7 percent quarterly gains. Online retailers attribute their ability to buck the trend to a combination of aggressive discounting and free shipping programs.
At a time when filling the gas tank can seem like a spending spree for many consumers before they even set foot in a store, the prospect of having an item delivered to their homes free of charge holds considerable sway. Free shipping offers now abound online, and experts forecast that, as the calendar moves closer to the all-important holiday selling season, websites that don’t provide free shipping (even if it comes with a minimum-spend prerequisite) will be at a competitive disadvantage.
Online retailers are also sweetening the offer by sharpening their pricing pencil – a strategy that is expected to chip away at the market share of traditional stores. In some cases, the discount is as little as 50 cents; in other instances, items are offered at a lower price for a small window of time. Regardless of the strategy, shoppers are clicking the “buy” button.
Tweaking frontline strategies is not the only tactic e-commerce merchants have deployed to encourage online buying. Online retailers are also adding new technologies – some apparent to shoppers, others less so – in an effort to make their websites more customer-centric and, hopefully, more “sticky.”
At No. 12 Macys.com, “searchandising” is being used to provide the most relevant response to customer inquiries. This next-level technology represents the convergence of navigation and merchandising functions, allowing online shoppers to get to the products they want faster. It also creates a deeper understanding of customer behavior – something that is keenly important to Macy’s.
On the payments front, Gap Inc. unveiled new website functionality called “universality” that brings together its four brands with global navigation and a universal shopping cart. Customers can shop No. 27 Gap.com, BananaRepublic (41), Old Navy (11) and shoe site Piperlime.com, put items from each store in a single shopping cart and purchase everything with one transaction.
American Eagle’s ae.com added PayPal to its payment options, providing another level of flexibility. Using PayPal gives shoppers the option of paying for clothing and accessories using debit cards, bank accounts, stored balance or credit cards while protecting their financial information.
