Internet Rises In Down Economy

Internet Retailer:

At The Talbots Inc., the web represents 10% of sales but accounted for 68% of sales growth in 2007.

At office supplies retailer Staples Inc., web sales accounted for 29% of all sales but 58% of Staples’ 2007 growth.

At Circuit City Stores Inc., December sales were down 10% and comparable store sales were down 12.2% while the company was expecting to report 40% growth in online sales for the year. It appears that all of 2007’s growth at Circuit City will come from its web site.

And at Gap Inc., 2007 sales were virtually unchanged from 2006, while online sales were up 24%.

These chains illustrate the new reality facing retailers: The Internet is the engine of growth, especially this year as it appears increasingly likely that the U.S. economy is in a recession. “The Internet today is one of the few opportunities for retailers to capture sales growth and market share,” says Robert Antall, CEO of Cleveland-based retail consultants Lake West Group. “A lot of my clients are looking to the web as an opportunity to salvage the year.”

Gaiam Inc. is a good example of what retailers are doing. It cut back catalog circulation as the result of higher production and postal costs and focused on beefing up its web site with a new e-commerce platform from MarketLive Inc. last November, new site search from Endeca Technologies Inc. that will be live in a couple of months, customer reviews from BazaarVoice Inc. and product videos. “With this economy, it’s been tough across the board so we are pouring money into our online initiative this year,” says Jason Marshall, vice president of Gaiam Direct.

The growing importance of the Internet means that every retailer who relies on the Internet for sales will face more competition online as the year progresses. “Over the last couple of months, we’ve seen more bricks-and-mortar jewelry stores open web sites,” says Neil Kugelman, CEO of online jeweler Goldspeed.com. “They’re bidding on many of the same keywords that we bid on at search engines and that has driven up our costs.”

Photo by rore_d.

« Previous Post

Next Post »