April 23 2003
selection of products sold on and
offline could explain the differences of
online growth rates between eRetailers
Indeed, it seems that the best results and growths online are made by eRetailers that have different selection of products on their web sites than in their brick-and-mortar stores.
And, "online" growth is today a main strategic aim for retailers.
See by yourself: in 2001, Census Bureau said that retail sales increased by 3.1% in US while at the same time, the online eRetail sales grew by 26.8%.
This phenomenon has amplified in the first quarter of 2002, eRetail sales increased by 28.2% while offline Retail sales grew by 1.6% only.
eCommerce's stake is often a question of opportunity. With the bankruptcy of hundreds of dot.com companies, brick-and-mortar retailers should try to take advantage from this exceptional and temporary situation to increase their online presence and assets.
classic retailers have understood the message and are today in the top
10 of Internet eRetail sites in terms of traffic as Wal-Mart, Sears or
The following examples illustrate the importance of a good eShopability.
Williams-Sonoma, a cooking and home products retailer, increased its online sales by 51% in 2002 to $200 million. Online sales accounted for 8.5% of the company's total revenue.
At Sharper Image, Internet sales grew by 40% ($69.5 million) and account now for 13.3% of the total revenue.
On the contrary, at Toys R Us', online sales increased by 23% (the half of Sharper Image). Worst, in Q4 2002, the company's online sales grew by just 11%. Internet sales account only for 3% at Toys R Us'. The same phenomenon can be seen at JC Penney.
To explain these growth rates differences between eRetailers, analysts think that they are due to the fact that companies as Williams-Sonoma or Sharper Image are speciality eRetailers and are offering online niche products difficult to find offline.
In contrast, JC Penney or Toys R Us' are more general retailers with far more less-differentiated products on and offline.
Add to this that the number of brick-and-mortars locations must not be irrelevant to this difference in growth rates. Sharper Image has only 127 offline locations, Williams-Sonoma, 478 while Toys R Us' has 681 stores in U.S. alone and JC Penney 1,049.
We must also not forget the indirect impact of the Web for retailers. Sears is a good example: Ann Woolman, the company spokeswoman, said that one out every seven Sears customers shops online at the company's Web site before making a purchase in one of its offline stores.
But even at Sears, rather than trying to recreate its entire store experience online, they are focusing now on specific products.
It's time for eRetailers, to better think at what makes the most sense for their Web customers.