Store-based merchants grew online sales at half the rate of web-only retailers during 2016.

As consumers shift a greater percentage of their retail spending to the web—and Amazon.com Inc. in particular—many of the country’s largest store-based retailers are struggling online. The struggle is even more prominent for their offline businesses.

As a group, the retail chains ranked in the newly released 2017 edition of the Internet Retailer Top 500 Analysis Report collectively had the slowest year-over-year online sales growth rate since the heart of the recession in 2009. It was also the second slowest growth rate for retail chains in the 14-year history of Internet Retailer tracking the largest e-commerce players in North America.

The 154 Top 500 merchants that primarily sell products through physical stores grew their collective online sales 10.7% in 2016, to $120.21 billion from $108.57 billion in 2015. For the sake of comparison, web-only retailers grew sales more than twice as fast as the chains, at 22.3%. And that’s not just Amazon, which is ranked No. 1 in the Top 500. Factoring out Amazon, web-only retailers in the Top 500 collectively grew their online sales 16.6% last year.


Retailers in the office supplies segment have struggled for years in stores and on the web as consumers spend less on paper and pens. Staples Inc. (No. 5) experienced an online sales decline of 9.3% in 2016, and Office Depot Inc. (No. 13) posted flat results with 1.5% growth last year.

Others that underperformed in terms of 2016 web sales growth include struggling department store chain Sears Holdings Corp. (No. 19), whose web sales dropped an estimated 10.0%; Gap Inc. (No. 24), which grew web sales 1.1% while total sales fell 1.8%; and Neiman Marcus (No. 41), whose online sales grew 7.3%—half the rate of the previous year—amid a 2.9% sales decline companywide.

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Many of the chains’ e-commerce businesses are now mature, and it is getting tougher to advance.  Consequently, pulling in double-digit growth rates on the web is not as easy as it once was—even for chains doing fairly well on the web. That’s true of Kohl’s Corp. (No. 18), for example, which grew online sales 13.0% in 2016, compared with 30.0% growth in 2015 and 23.2% in 2014. Nordstrom Inc. (No. 17) grew 13.7% online last year, a deceleration from 20.2% in 2015 and 20.7% in 2014.

A number of the biggest retail chains are closing stores or cutting staff to improve profitability, and in many cases, to support increased e-commerce investments. Macy’s Inc. (No. 6), shortly after the close of a mixed holiday season, announced plans to cut about 6,200 jobs and shutter 100 stores. The moves are designed to cut costs and free up an additional $250 million for the retailer to invest, in part, in its e-commerce operations, Macy’s says.

Our omnichannel strategies continue to evolve based on the changes in our customers’ shopping behaviors, including a focus on buy online, pick up in store and mobile-enabled shopping.
Terry Lundgren | CEO
Macy's Inc.

“Our omnichannel strategies continue to evolve based on the changes in our customers’ shopping behaviors, including a focus on buy online, pick up in store and mobile-enabled shopping,” CEO Terry Lundgren said at the time of the announcement and shortly before he gave up the CEO post to become executive chairman of Macy’s. “In addition, we have invested in and enlarged our customer data and analytics team, which will help drive our new marketing strategies for 2017.”

Macy’s grew online sales 11.0% last year to an Internet Retailer-estimated $6.89 billion. Total sales fell 4.8% for the year.

Shortly after the Macy’s announcement, J.C. Penney Co. Inc. (No. 33) followed suit, revealing plans to close up to 140 stores and a pair of distribution centers this year. J.C. Penney, which grew online sales 16.0% last year to an estimated $1.64 billion amid a 0.6% decline in total sales, was careful to note, however, that the store closures would not affect the company’s efforts to better link its stores with its web and mobile properties.

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“One of the key points in deciding which stores we would close was to make sure that we still could service our omnichannel customer effectively,” CEO Marvin Ellison told analysts during the retailer’s Q4 earnings call. “We’ll be very aggressive this year rolling out a ship-from-store initiative that’s going to allow fulfillment of online orders from a significantly higher percent of stores than we’ve ever done.”

The 2017 edition of the Top 500 Analysis Report is available as a PDF report or in an online database format. The report provides a comprehensive look at the trends and key players shaping the U.S. e-commerce industry, as well as a deep dive into who the leaders are and what they’re doing to stay ahead of the competition—or, in many cases, to survive.

The online database membership—depending on the subscription level—offers the list of companies and a host of exclusive data, including financial and operational data, key e-commerce executive names and a list of technology vendors each merchant uses to run its online retail business.

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