Retailers Make Big Gains in E-Commerce Sales
Move over, Microsoft. For the very first time, online apparel sales outpaced computer-product sales in 2006. Apparel is No. 1 for all non-travel-related e-commerce sales, according to a recent study by Cambridge, Mass.–based think tank Forrester Research Inc.
E-commerce executives said that’s a big deal considering that computer hardware, software and peripheral sales have long dominated the world of e-commerce along with online travel. The study was conducted for the National Retail Federation affiliate Shop.org (www.shop.org) and was based on sales figures as well as interviews with 170 retailers.
Apparel, footwear and accessories sales hit $18.3 billion in 2006. They are projected to climb to $22.1 billion this year. About 10 percent of all clothing sales now occur online, according to the report.
“Apparel retailers have overcome a number of hurdles to encourage shoppers to buy clothing and accessories online,” said Scott Silverman, executive director of Shop.org.
“Retailers are doing such a great job online that in some cases it’s easier to find and buy clothing on the Web than it is in a store.”
Apparel e-commerce has come a long way in a short time. When stores began moving into e-commerce several years ago, shoppers hesitated because of size, fit and security issues as well as a general fear of the unknown. But technology and a big focus on customer service have changed the minds of many consumers.
In addition, new multimedia technologies, such as 3-D mannequins and tools that allow shoppers to zoom in on fabrics and rotate garments 360 degrees, have made the online experience more visual and convincing.
More recently, online retailers began piling on the perks with free shipping, lenient return policies and discounts. There are also more choices with the influx of online boutiques during the past several years.
“Early adopters had to overcome huge obstacles, such as making sure product was in stock, delivering it on time and being able to address customer concerns,” explained Eric Allen, an executive with Los Angeles–based One Stop Internet Inc., which develops e-commerce sites for a number of West Coast brands, including 7 For All Mankind, Chip & Pepper, True Religion and others.
“Now, people who are familiar with brands and their fits are more comfortable in purchasing items online, especially when the brands reduce the barriers to buying apparel online by providing accurate product descriptions, free shipping and easy return policies. If I know I’m a size 33 in 7 For All Mankind, I get free shipping, and it’s delivered quickly. So why wouldn’t I buy online?”
Allen said consumers are willing to buy not only replenishment items such as T-shirts but also higher-priced designer dresses, suits and bags.
Added Steve Oprian, president of Orange County, Calif.–based Amore Fashion (www.amorefashion.com): “E-commerce has been an evolution. The convenience factor is huge, and it’s especially important for women who don’t have a lot of time and those who may not be as lucky to have a Rodeo Drive down the street.”
New day for shopping sites
It hasn’t always been that way. Pamela Holcomb of Los Angeles–based online boutique P & J StyleWorx saw the frustration in her own online shopping experiences years ago.
“In 1999, there was not a lot out there. And what was there, the shipping was ridiculous, the return policies were terrible. There was no customer service. We thought we could do better,” she said.
Three years ago, Holcomb and business partner Jennifer Hendrickson launched their Web site (www.pandjstyleworx.com), offering free shipping, free gift wrapping and low, flat-fee returns and focused on customer service and product. The site concentrates on contemporary designs, featuring West Coast brands such as 2B Free, Rachel Pally, Ella Moss, Serfontaine, Hale Bob and Kate Ruber. The company has made steady progress since launching, and its owners expect to make their first profit this year along with growth of about 30 percent.
Amore Fashion is also experiencing robust growth, posting a 300 percent increase in sales over the past year, said Oprian, who added that the improvements are being fueled by denim, accessories and home-accents sales. A lot ofmanpower has also helped.
“We made a concerted effort to improve the site and make it easy for consumers to use. We bring in quality designer merchandise monthly and offer something at almost every price point,” Oprian said.
According to the Forrester report, overall online sales are expected to rise 18 percent to $259.1 billion this year, compared with $219.9 billion last year, which was a 25 percent surge.
“This strong growth is an indicator that online retail is years away from reaching a point of saturation,” said Sucharita Mulpuru, Forrester Research’s senior analyst and lead author of the report.
Another sign that e-commerce has come of age is that profitability throughout the sector has stabilized. Eighty-three percent of the survey’s respondents reported profitability, and 78 percent said they were more profitable than in 2005. Profit as a percentage of revenue did not change, the report notes, because revenue and expenses grew as well.
Still, e-tailers say the online environment is getting more competitive.
“You are dealing with a lot more competition online. If you go to a mall-based Nordstrom looking for a Rachel Pally dress, you may find it in one or two more stores in the mall. But do a search online, and you’ll probably see at least 10 hits for the same dress,” Holcomb said.
