In 2015, small and midsized web merchants reached a new level of success.
For the first time since Internet Retailer began tracking this group of online retailers in 2011, the e-retailers ranked in the newly released Internet Retailer 2016 Second 500 Guide surpassed their larger competitors in the Top 500 Guide and the U.S. e-commerce market as a whole by collectively growing web sales 14.9% in 2015. The Top 500 grew 13.5% and the U.S. market grew 14.6% last year.
But success online is defined by more than sales growth. To that end, Internet Retailer has compiled a Performance Score, which measures how merchants in the Second 500 performed against their peers across a number of important metrics. Those metrics include conversion rates, mobile commerce technology, social media marketing effectiveness, and short-term and long-term growth rates compared to other merchants in their category.
Apparel retailer Betabrand Inc. (No. 640) distinguished itself as the top performer in the Second 500 in many ways, including fast sales growth last year and over the past five years, and by an effective social media strategy that drives a large portion of its business.
The retailer, which sells online and via one physical store in San Francisco, lets consumers vote on the merchandise it will sell. Betabrand designs, manufactures and sells apparel based on how online consumers vote on new products displayed on the site.
Below is a list of the top five Second 500 retailers based on their Performance Score and the specifics of how each merchant earned its score:
No. 1: Betabrand Inc. (Performance Score of 79 out of 100)
- Betabrand Inc. gets high marks for its sustained growth over the past five years. The merchant has a 73.2% five-year compound annual growth rate compared with the 21.6% average for the Second 500 as a whole. The retailer also outpaced many others in the short term, as it increased sales 50.0% online in 2015 to an Internet Retailer-estimated $18.0 million. By comparison, Second 500 merchants collectively grew web sales 14.9% in 2015.
- The apparel retailer outpaced many of its competitors in the apparel category, as its 50% annual growth is double the collective annual growth of 18.1% of Second 500 merchants that sell clothing.
- Betabrand Inc. has a large and engaged following on social networks, which also earns the retailer high marks. This shows up in the merchant’s website traffic makeup, as 12.8% of its site visitors arrive directly from social networks, according to web traffic measurement firm Millward Brown Digital. This is five times higher than the average 2.6% received by other Second 500 merchants.
No. 2: Cabinets.com (78 out of 100)
- Cabinets.com (No. 723) receives the highest score for its stellar 118.4% five-year compound annual growth rate, far above the 21.6% average for the Second 500.
- In only its second year in the Second 500, Cabinets.com outpaced growth in its category, with its 77.4% one-year growth easily exceeding the 14.9% average of the entire hardware and home improvement sector; impressive movement considering some of its competitors have been ranked for more than six years. Cabinets.com’s web sales reached $13.935 million in 2015 up from $7.855 million the previous year.
- By comparison the second-highest growing merchant in the category, Sustainable Supply LLC, grew 32.8% in 2015.
No. 3: Skye Associates LLC (78 out of 100)
- Compound annual growth rate wins the day for the parent company of several online apparel sites, Skye Associates LLC. In the past five years apparel and accessories merchant Skye Associates (No. 561) grew online sales at a CAGR of 56.3%, two and a half times higher than the collective Second 500 growth rate of 21.6% during that same period.
- Skye Associates LLC also outpaced other apparel retailers by growing its online sales 60.0% in 2015 to an Internet Retailer-estimated $24.0 million from $15.0 million in 2014. That’s more than three times higher than the 18.1% average among Second 500 apparel retailers.
- The apparel category is always the most populated, making it tough for competitors to stand out or get ahead, so achieving high scores for growth in this category is a major accomplishment.
No. 4: The Red Dress Boutique (Score of 77 out of 100)
- Apparel retailer Red Dress Boutique (No. 580) receives top scores for both its web sales growth and its five-year compound annual growth rate. Ranked No. 20 out of 111 apparel retailers in sales in the Second 500, the merchant’s 207.2% growth over five years is almost 10 times higher than the category average of 21.6% over the same period.
- Red Dress Boutique grew web sales 60.0% last year, according to Internet Retailer, to $22.3 million in 2015 from $13.9 million in 2014, placing it far ahead of the collective 18.1% average annual sales growth of its apparel competitors.
- The merchant receives high marks for its social media marketing. Red Dress Boutique gets 5.7% of its traffic from social networks and has more Likes and followers than its closest competitors. For example, Red Dress Boutique has 230,758 followers on Instagram (a social platform fueled by product pictures, which is especially effective for apparel retailers) and its close competitors Stein Mart and Ulla Popkin have 3,593 and 488 respectively. Red Dress Boutique also has 17,981 Twitter followers, far out-populating Stein Mart’s 5,590 and Ulla Popkin’s 495.
No 5: iBuyOfficeSupply.com (Score of 76 out of 100)
- Office Supply merchant iBuyOfficeSupply.com (No. 571) gets a solid score for being third in its category in online sales. This merchant also shines with its 49.5% online sales growth in 2015 as compared to the 10.6% growth for the office supply category. The company’s online sales reached $23.30 million in 2015, up from $15.58 million the previous year, which is sterling growth for any midsize merchant in the office supplies category. Its competitor Poppin claimed the second-highest growth rate in the category at 35%.
- iBuyOfficeSupply.com also found a competitive edge by tapping into new ways of getting its products in front of online shoppers. The merchant was the first in the office supplies sector to sell on the Jet.com marketplace, which launched in mid-2015 and says it already serves 3.6 million consumers.
Internet Retailer factored in the following 10 metrics into each score:
- 2015 web sales
- 2015 web sales growth
- 5-year compound annual web sales growth rate
- Merchant rank in its merchandise category
- A comparison of each merchant’s 2015 growth rate to the collective growth rate of all Top 500 merchants in the same category. (For example, how the growth of one book retailer compares to that of other book retailers).
- Conversion rate index (a measure of how often retailers’ customers convert in comparison to its direct competitors)
- Average ticket index (a measure of average order value in comparison to direct competitors)
- A check of whether the retailer has a mobile-optimized site
- The time it takes to load a website
- The percentage of traffic each merchant receives from social networks
Profits are not factored into Internet Retailer’s scoring system. The bulk of the merchants ranked in Internet Retailer’s global e-commerce publications are private, and it’s difficult to determine their profitability.
More information on how North American’s Second 500 largest online retailers scored on performance is available in the newly released Internet Retailer 2016 Second 500 Guide.
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