Growth is slowing, competition online is increasing, and consumers are cutting back online just as they are at the malls.
But all is not doom and gloom. As in the offline world, the strongest e-tailers will survive. Those with unusual and desirable merchandise, good prices, free shipping and a global reach are best poised to weather a shakeout, said merchants and analysts. For brick-and-mortar stores, the Internet still represents an opportunity, while smaller Internet pure plays will be the most challenged because they lack deep pockets and aren’t household names.
Already, children’s wear retailer Parent Co. and contemporary store Active Endeavors shut down earlier this year, and LVMH Moët Hennessy Louis Vuitton’s eLuxury is winding down operations.
Despite these challenges, Web sales are at least still increasing in one of the worst retail environments in decades as more consumers shift their spending to the online channel, said Forrester Research Inc. analyst Sucharita Mulpuru.
“Everyone is cutting back discretionary spending, and apparel is generally viewed as discretionary, so that cannot be helping e-tail or retail in general,” Mulpuru said. “The flip side is everyone is having aggressive sales and discounts, and the fear is these are great deals you can’t miss. That’s what salvaging the business that’s out there to the degree it exists. And you have a larger shift: If anyone is going to be spending, it’s going to the online channel. If you’re going to be spending, there are more people year over year spending online, browsing online, purchasing online.”
According to a report, “The State of Retailing Online 2009: Marketing,” due to come out today from the National Retail Federation and Forrester, online retail in the U.S. in 2009 will increase 11 percent to $156.1 billion, versus 13 percent in 2008 and 18 percent in 2007. Clothing, accessories and footwear will remain the number-one category this year at $27 billion, Forrester predicts.
The firm forecasts online sales in 2010 will accelerate by 13 percent, to $176.9 billion, then slow down again to 8 percent growth to $40.3 billion by 2013.
Profit and Loss
Despite the slowdown, Amazon.com is doing startlingly well and Blue Nile is solid, but not all online pure-play retailers are healthy. Multichannel retailers and big brands have an advantage because they have deep pockets and are trusted and well-known, said Mulpuru, noting Macy’s Inc. and Gap Inc. have reported double-digit growth online for several seasons even as their brick-and-mortar operations suffer in the recession.
Amazon, which includes contemporary retailer Shopbop and shoe store Endless, has grown into a huge powerhouse doing almost $20 billion a year with about $645 million in profit. In the fourth quarter, when some retailers were down more than 20 percent, the company had its best quarter ever and brought in $6.7 billion in revenues, an increase of 18 percent over the same period a year earlier. Net income did not grow as fast as in previous quarters but was up 9 percent to $225 million, some of which was due to the popularity of the Kindle, Amazon’s e-book reader. Gross margin was 20.66 percent.
The company continued to do well this quarter, posting net income of $177 million on net sales of $4.89 billion, an increase of 24 percent and 18 percent, respectively, compared with the same quarter last year.
Shopbop has a new chief executive officer, Jeff Yurcisin. Amazon would not say when he replaced Shopbop founder Bob Lamey nor if Lamey continues in any capacity with the company.
Blue Nile pulled in $300 million in sales last year, and made a profit of $11 million, even though it was down slightly from 2007.
As for other e-tailers, Overstock generated sales of $834 million in 2008, and a small loss of $12,000.
“I always hope for no news because when the news is bad” people panic and no one wants to buy,” said Melissa Payner, president and ceo of Bluefly. “Shopping makes you feel better, even if it’s a little item.”
Bluefly’s customers are spending just as much on individual pieces, but they’re purchasing fewer items per order, Payner said. “Given the promotional environment, I think they’re almost drunk with buying power. Before it was an impulse purchase and now it’s much more considered,” with consumers experimenting with putting things into their cart and taking them out again over a long period, she said.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews