Advertisement
 

Retail chains are embracing their online stores

Traditional merchants such as Macy's are adapting to online shoppers, challenging themselves to find more sophisticated ways to compete with Internet-only retailers such as Amazon.com.

June 18, 2010|By Andrea Chang, Los Angeles Times

When shoppers at JCPenney Co. stores can't find what they want, sales clerks are steering them to the Internet — not at their home computers, but at new online kiosks right inside the stores.

Action sports retailer Zumiez Inc. has opened more than 200 stores over the last four years. But this year, it has scaled back its openings to focus on building its e-commerce sales.

Even Macy's Inc. is doubling down on its dot-com. The company whose name is almost synonymous with "department store" has seen its online sales rocket more than 50% in the last two years. It recently junked its standard cash registers for 50,000 high-tech ones that can check online for items that are out of stock in the store and place orders directly for customers.

Welcome to Online Retailing 2.0. Traditional brick-and-mortar retailers once outsourced their online sales to specialty "fulfillment" companies. Today they are running their own online operations — and increasingly challenging their executive brainpower to find more sophisticated ways to compete with online-only retailers such as Amazon.com Inc.

"When you look at the big retailers, they clearly have not grown online at the same rate as Amazon has," said Marshal Cohen, chief industry analyst at market research firm NPD Group. "The online business has been the redheaded stepchild. That's starting to change."

To be sure, online revenue still accounts for a small percentage of total retail sales. Although online sales totaled $134 billion last year, the National Retail Federation estimates that's only about 7% of all retail sales.

But growth has been rapid, with online sales soaring nearly 400% since 2000.

Macy's, for example, said online sales last year topped $1 billion for the first time, accounting for about 4.3% of total revenue. That's up from about 3.3% in 2008.

Analysts say economics is driving the trend. It costs less to process online orders than to lease retail space and field an army of sales clerks. There are almost no limits on inventory, and bulky items such as luggage can be shipped from a warehouse instead of taking up precious floor space.

Time-starved consumers also are finding it more convenient to browse items online instead of driving to the mall, where they may or may not find the right size shoe or the exact color bed sheets they want.

Jay Hou, 34, says he does 95% of his shopping online these days, as his job at a telecommunications company and his 14-month-old daughter take up so much of his time. When he needed a suit for his wedding, he turned to designer apparel website Bluefly.com.

"I ordered four because they had a good return policy," the Santa Monica resident said. "I hung the suits up on the wall for about a month and kept looking at them and tried them on as the weeks went on. Then I decided on one and shipped three back."

To get more customers like Hou, retail executives are spending much of their brainpower on the challenge of boosting online sales. To better compete with Amazon, for example, book giant Barnes & Noble Inc. shook up its top management this year, replacing its chief executive with the head of its online division.

And besides offering more discounts and deals such as free shipping, they also are moving into more sophisticated models of online selling. Those include combining e-commerce and store divisions and expanding online selections and services.

"It's gotten to the point where you can't think about online retail the way retailers have thought about it in the past," said Kasey Lobaugh, a principal at Deloitte Consulting who advises major retailers on developing their online channels.

Lobaugh said his advice centers on making the buying process faster. He recommends systems that recognize customers and feature fewer clicks, such as a single-page checkout.

"It's actually a massive undertaking for most retailers because they've built up their organizations with separate operations for the stores and for e-commerce," he said. "All of that has to be redone and recast."

Gap Inc. is expanding its e-commerce network to Canada and Europe in the fall; Ann Taylor Stores Corp. is expanding its online selection, implementing a faster checkout process and adding personalization capabilities to its website; and Kohl's Corp., like JCPenney, is adding do-it-yourself online kiosks to its stores.

The transition is not without challenges.

Nordstrom Inc., for example, has long focused on customer service to sell its pricey products. When the retailer found that many online shoppers had questions because they couldn't touch and feel the merchandise, Nordstrom added a live Web chat feature and staffed it with specialists in beauty, designer brands and other categories.

Advertisement
Los Angeles Times Articles
|
|
|