As their stores struggle, their e-commerce operations are quietly flourishing.

The top executives of the nation’s largest store chains these days must feel that they are living the retail version of Charles Dickens’ ”A Tale of Two Cities,” which contrasted life in Europe’s two largest cities at the time of the French Revolution. Their brick-and-mortar outlets’ sales are gloomy as they struggle to cope with the revolution in consumer shopping behavior. Think of Paris in 1800.  But when it comes to the big chains’ e-commerce operations, this is definitely the best of times. Think London in 1800, which then was the most vibrant city and economy on the planet.

The second quarter results announced last week by four of the nation’s largest mass merchants show the very different retailing trends today between the off-line and online channels. While it is easy to focus on the big chains’ overall second quarter results—where same-store sales were often flat or down—that approach misses the chains’ e-commerce businesses, where sales soared.

This picture was consistent across market sectors. Low-end, mid-market and higher-end stores all failed to show anything near the sales growth that the operators of those retailers  are experiencing in their smaller e-commerce operations. Wal-Mart Stores Inc., the world’s largest retailer, reported an anemic 0.1% growth rate in same-store sales in Q2. Much higher up the price spectrum, Macy’s Inc. surprised Wall Street by reporting nearly a 1% decline in its retail sales, missing the street’s expectations for the first time in six years. Things were better, but not great, at Kohl’s Corp., where comparable store sales were up 2% in the quarter, and better still at Nordstrom Inc., where same store sales were up a healthy 4.4%

But for each of these major retail chains, the story at the online side of their businesses could not have been more different.  All experienced strong online growth in the second quarter: Wal-Mart’s online sales were up 30%, Kohl’s 28%, and Nordstrom 37%. Macy’s did not break out its same-store sales from its e-commerce sales in the second quarter, possibly because its thriving e-commerce operation helped hide a decline in store-based sales that was even greater than the 0.8% decline it reported for overall sales. For 2012, Macy’s e-commerce business grew 41% to $3.2 billion, according to the 2013 Top 500 Guide, which ranks Macy’s No. 12 among America’s 500 largest e-retailers. And since its e-retail growth last year was hardly an anomaly (its e-retail business has tripled since 2008), it is highly likely that Macy’s online growth is continuing in 2013.

By treating their online channels as simply another store, Macy’s and other chains may be improving the appearance of their “same-store” results by hiding the weaker performance of their brick-and-mortar outlets. At the same time, however, they are downplaying the enormous success they are having online.


This year the big store chains may be outperforming the online market as a whole. In the second quarter, for instance, the U.S. Commerce Department reported last week that total e-retail sales increased 18.4% from the same period a year ago. As stunning as that rate is, it was beaten by the online channels of Wal-Mart, Kohl’s and Nordstrom. And Macy’s and other chains that choose to hide their advances online to protect the image of their stores with doors may also have beaten that growth.

It’s a strange game, because companies typically like to spotlight operations that are going well to take attention away from those that are underperforming. And right now, the big store-based chains are getting some strong returns on the investments they have recently made in their online channels. That’s a major change in strategy from prior years, when the big chains’ e-commerce businesses played second fiddle to their physical stores, and their online growth rates understandably fell somewhat short of the overall e-commerce market and far short of the growth rates of more innovative pure play web merchants, led by Inc. Yet, if recent spectacular gains by the big chains in the online market remain a well-kept secret, that may be exactly what the chains want.