California Apparel News

Although overall retail sales this past year were nearly flat, purportedly due to the housing finance debacle and rising energy costs, the view online—especially for apparel—remained rosy.

Online apparel sales surpassed online computer sales for the second year, according to a recent Shop.org/Forrester Research study. Total online sales are expected to hit $259 billion for 2007, and 10 percent of that is expected to come from clothing.

“Apparel retailers have overcome a number of hurdles to encourage shoppers to buy clothing and accessories online,” said Scott Silverman, executive director of Washington, D.C.–based 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.”

The report suggests that the apparel-and-accessories category has experienced strong sales because of an influx of new companies and liberal shipping policies such as free shipping on returns and exchanges. Additionally, more and more apparel and accessories retailers are integrating new user-friendly technologies into their sites, including rich photographic imaging that allows customers to zoom in on and rotate merchandise and see the item in different colors.

Computer hardware and software, long the frontrunner in non-travel online sales, moved into second place in 2006 at $17.2 billion, followed by sales of autos and auto parts ($16.7 billion) and home furnishings ($10 billion).

“As consumers flood the Web to purchase merchandise and research products, online retail is moving full speed ahead,” said Sucharita Mulpuru, senior analyst at Cambridge, Mass.–based Forrester Research and lead author of the report. “This strong growth is an indicator that online retail is years away from reaching a point of saturation.”

Another sign that e-commerce has come of age is that profitability throughout the sector has stabilized. Eighty-three percent of respondents to the survey reported their endeavors to be in the black, 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.

Barneys Advances E-Tail Targeting With New Tool

Upscale retailer Barneys New York has become the first announced client for startup Proclivity Systems, whose technology helps retailers determine which customers are most likely to respond to certain offers. Barneys signed up with Proclivity after a three-month test showed customers were up to 10 times more likely to respond to offers when e-mail lists were segmented with the Proclivity Mail system, said Larry Promisel, vice president of e-commerce at Barneys New York.

The Proclivity Mail system collects data on customers, such as what products they look at, what they put into their shopping cart, what they buy and which e-mail offers they respond to. Barneys can then ask the Proclivity tool to create an e-mail list of customers most likely to respond to an offer on shoes or those most responsive to markdowns. Testing began last summer, and fewer unsubscribe requests are being received today as the mailings become more targeted.

In the future, Barneys would like to refine the technology further so that it can show the most relevant products in a given category to each customer based on previous purchases.

Proclivity charges Barneys an undisclosed fee per thousand names generated for e-mail lists, Promisel said.

Previously part of the Jones Apparel Group, Barneys New York Inc. was sold in September to Istithmar PJSC, a Dubai-based private-equity firm, for $945 million. Barneys, which holds the No. 303 spot in the Internet Retailer Top 500 Guide, has not disclosed its e-commerce revenue.

Back to the Drawing Boad?

Advertisers are looking to new “worlds” to reach the youth market.

Marketers continue to experiment with selling through video games, hoping that “in a world of their own” 18- to 24-year-old males might at last be reached directly to, say, buy a pair of jeans in the places they “hang.”

Recently, dummy or “house” ads have been popping up as tests in the landscapes of some of the popular video games for Xbox and Playstation2 as well as some of the more-exotic “virtual worlds” such as “Second Life,” which feature avatar-driven “other selves.” Game publishers are considering the additional income versus the savvy audiences’ perception of the ads as spam.

Slipping ads into video games with good results was promised by a company called Massive, created by Mitch Davis in New York. He promised delivery of ads from a few companies such as market innovators Honda, Activision and Nokia for $2 to $3 per Internet-connected user.

Massive commissioned Nielsen ratings to study the effectiveness of this new medium as an advertising platform, only to conclude that gamers are way too immersed in playing the games to pay any attention to the ads. This conclusion was reached several months after Redmond, Wash.–based Microsoft acquired the software start-up in late 2005 for a reported $200 million.

Experts are now saying that the growing gaming market needs a newer, “moreimmersive” technology that works more effectively within the gaming context before significant results can be expected.