Amazon.com Inc. has been taking e-commerce market share for the last several years, but several major retailers grew faster in the fourth quarter of 2012 than the No. 1 web retailer.
An analysis of the data for 35 Top 500 retailers that break out fourth quarter and annual web sales shows that 15 of those retailers grew faster online during the holiday period than Amazon did. Amazon, No. 1 in the 2012 Internet Retailer Top 500 Guide grew its fourth quarter sales year over year about 22% to $21.27 billion from $17.43 billion. Without Amazon, the 34 other retailers increased their web sales 15.4% to $736 million from $638 million. Including Amazon, the 35 retailer increased their online sales 20.2% to $28.63 billion in 2012 (or their most recently completed fiscal year) from $23.81 billion in the prior year.
As a group, their growth was in line with the growth in online retailing. In the fourth quarter total e-commerce sales grew year over year 15.8% to $71.60 billion from $61.83 billion in the prior year, according to the U.S. Commerce Department. U.S. consumers spent $42.28 billion online in November and December, a 13.7% increase compared to $37.17 billion during the holiday shopping season in 2011, according to web measurement firm comScore Inc.
But the analysis of data contained in Internet Retailer’s forthcoming 2013 and 10th anniversary Top 500 Guide, shows some clear winners— and losers—among Top 500 merchants in the fourth quarter.
Among all of the retailers included in Internet Retailer’s analysis, LuluLemon Athletica Inc., despite its recent shopper backlash over see-through yoga pants, posted the biggest gain in fourth quarter Internet sales, up by 56.3% to $78.3 million from $50.1 million in the fourth quarter of 2011. LuLuLemon (No. 162) was followed by Ascena Retail Group (No. 171), which increased fourth quarter web sales year over year 48.9% to $39.0 million from $26.2 million; Williams-Sonoma Inc. (No. 24), up 46.6% to $576.0 million; Deckers Outdoor Corp. (No.161), up 42.1% to $87.6 million; American Apparel Inc. (No. 287), up 41.2% to $18.5 million; Kohl’s Corp. (No. 28), up 40.4% to $640.0 million; and Express Inc., which grew Q4 web sales 39.4% to $120.9 million in 2012 from $86.7 million in the final quarter in 2011.
Web sales for Amazon in the final quarter of 2012 grew at a healthy clip. But other web retailers grew faster because of their merchandise niche or because their holiday promotions and discounts appealed to a particular audience of shoppers, especially younger women apparel shoppers or parents and friends shopping online for certain apparel brands and styles Amazon.com doesn’t carry, says Jim Okamura, managing partner of retail consultancy Okamura Consulting. “Where certain niche and specialty merchants did better than Amazon in the fourth quarter was by telling their core customers ‘we have the brands, styles and prices here you aren’t going to find anywhere else,’ and following through on that strategy with very focused marketing,” Okamura says.
The Top 500 retailers showing the biggest drop in fourth quarter e-commerce sales included J.C. Penney (No. 20), which posted a year-over-year drop of 34.4% to $315.0 million from $480.0 million; U.S. Auto Parts Network (No. 76), down 18.6% to $62.8 million from $77.2 million; and Brookstone Inc. (No. 180), down 4.1% to $60.1 million from $62.7 million.
J.C. Penney dropped year over year more than many other retailers because shoppers, whether online or in stores, didn’t buy into Penney’s new “Fair and Square Every Day” flat pricing strategy introduced by CEO Ron Johnson in January 2012. “J.C. Penney is focused on transforming their stores, and their e-commerce business is suffering for it,” says Nikki Baird, managing partner of research and advisory firm Retail Systems Research. “It’s ironic, because Penney was such an e-commerce juggernaut in the early days and one of the first store-based retailers to achieve $1 billion in annual online sales. Their results seem more because of their strategy than because of any reflection on the economy or shopping patterns.”
The Top 500 retailers that did the best job of growing their year-end sales generally were those that got their discount message—and strategy—out early and often, says Howard Davidowitz, chairman of retail consulting firm Davidowitz & Associates. For example, Wal-Mart Stores Inc. (No. 4) announced in September it was giving its Facebook fans early access to layaway and in early October Sears Holdings Corp. (No.8), which operates Sears.com and Kmart.com, added a layaway delivery option. Layaway also was available online throughout the holiday shopping season. “The online retailers that did the best in the fourth quarter beat everyone else to the punch with their discount and value message,” Davidowitz says. “The ones that grew that fastest and had the best results were successful in creating a sense of urgency among discount shoppers with the message ‘get it early on sale now because it might not be available later.’”
Overall, the fourth quarter represented just over a third of the annual web sales of these 35 retailers, 35.4% basically the same as 35.3% in the prior year. But the fourth quarter represented a smaller part of annual online sales in the most recent 12-month period for a majority of the retailers in this group. Of the 35 publicly traded retailers analyzed, 20 showed a decrease in the Q4 percent of quarterly sales compared to 13 merchants that gained and two retailers that remained essentially the same.
Brookstone registered the biggest drop in fourth quarter web sales as a percent of annual online sales, declining to about 57% in 2012 from 64.8% in 2012. Next is LuLuLemon, declining from 39.7% to 47.1%; Foot Locker Inc. (No. 54) from 32.4% to 28.6%; Aeropostale Inc. (No. 114) from 47.8% to 44.6%; and U.S. Auto Parts Network from 23.6% to 20.7%. As a percentage of fourth quarter web sales of all online sales, Amazon declined year over year to 34.8% from 36.3%.
The retailers showing the biggest increases in fourth quarter web sales as a percentage of full-year Internet sales were Deckers and Williams-Sonoma, respectively. Final quarter web sales as a percentage of total e-commerce sales for Deckers increased to 73% from 57.8% and 34.8% from 27.9% for Williams-Sonoma.
Some retailers in the Internet Retailer analysis posted higher growth online in their nine-month financial results than in the fourth quarter because they aren’t as dependent on the Christmas holiday shopping season, Okamura says.
As an example he cites LuLuLemon. For the first nine months of the year, web sales for LuuLuLemon increased 111% year over year to $119.0 million compared with about 57% in the final quarter. “LuLuLemon had a strong fourth quarter online but grew faster earlier in the year because they didn’t feel the need to discount their merchandise or offer rock bottom free shipping as much as someone else,” Okamura says. “They probably thought too much discounting would hurt their brand.”
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