Byline: Ira P. Schneiderman

NEW YORK — Once upon a time, before the dawn of the Internet economy, brokerage firms were interested mostly in quantitative information to evaluate companies’ performances.
But with the Net’s rapid emergence — and the inflated stock values it has sparked — Wall Street has had to develop qualitative measures in addition to numerical ones like price-earnings ratios, cash flow and earnings, because most dot-com operations are awash in red ink.
A case in point: the latest edition of Merrill Lynch’s Web Watch, which monitors the progress traditional broad-lines retailers are making in their new role as e-tailers.
The study, which also sized up the e-tail outlook for those click-and-mortar retailers, evaluated the current performance and content of the Web sites they operate according to 10 parameters. In addition, the Web Watch tested the process of ordering merchandise from the sites purchasing various items and tracking the results.
The 10 qualitative elements were: easy navigation; assortments that offer one-stop shopping; an easy return policy; ample product information; a gift registry; competitive prices; effective customer service; simple, hassle-free ordering; reliable delivery, and the integration of a catalog business with fulfillment expertise.
Merrill Lynch’s broad-lines retail practice, led by senior analyst and first vice president Daniel D. Barry, tracks a group of 20 publicly held companies, including Federated Department Stores, May Department Stores, Dillard’s, Nordstrom, Neiman Marcus, Saks Fifth Avenue, J.C. Penney and Sears, Roebuck & Co.
“We expect brick-and-mortar retailers to ultimately develop large-size e-commerce businesses while the ‘early mover’ sites remain relatively small in scope,” Barry projected. “Broad-lines retailers are rapidly developing their Web sites, but are still well behind Amazon, the leader in overall excellence.
“Each of the companies analyzed is at a different stage of e-commerce development,” Barry noted, “so it presented some difficulty in setting true comparisons between each retailer. Therefore, we rated the retailers in our survey against each other rather than against more advanced retailers such as the soft-lines [specialty retail] group and pure plays such as Amazon or Buy.com.”
In its analysis of the 50 sites operated by the group of 20 retailers, conducted both by shopping the sites and interviewing management, Merrill Lynch identified the 10 criteria that contribute to successful e-commerce.
Barry was quick to point out, however, that “there is no perfect formula for the success of each retailer, and success may not be limited to, or fully defined by, the 10 elements.”
Merrill Lynch spotlighted a top performer in each of the 10 categories, and in most cases named runners-up. Here are the rankings:
Functionality: Sears; runners-up: Target, Federated.
One-stop shopping: Wal-Mart; runners-up: Target, Federated, Penney’s.
Easy return policy: Nordstrom.
Product information: Sears; runners-up: Neiman Marcus, Penney’s.
Gift registry: Federated; runners-up: Penney’s, Neiman Marcus, Dillard’s.
Competitive prices: Wal-Mart, Costco and Target, in a three-way tie.
Customer service: Sears and Nordstrom.
Simple, hassle-free ordering: Barnes & Noble.
Reliable delivery: Barnes & Noble and Borders.
Integration of catalog business with fulfillment expertise: Federated; runners-up: Penney’s, Nordstrom, Target.
More broadly, Barry cited five significant advantages he believes brick-and-mortar sites have over the pure-play e-tailers: buying power, established brands, marketing-cost synergies, store sites that function as showrooms and return facilities for cybershoppers, and a venue for in-store kiosks.
“These are factors that may be important enough to determine the success or failure of e-commerce,” Barry contended.
“We believe that e-commerce is an important tool for broad-lines retailers, especially for basic apparel, gift items, books, music, toys and home products,” Barry concluded, “but it will remain a small portion of the total core business for some time.”