All 15 merchandise categories in the newly released 2018 Internet Retailer Top 1000 saw at least small increases in online sales during 2017. But that growth was far from evenly distributed.
Like last year, the top-performing merchandise category in the Top 1000 was Housewares/Home Furnishings retailers, which is composed of 112 retailers. Online sales for that group soared a blistering 32.8% in 2017, according to Internet Retailer estimates and company reports. By comparison, overall (online and offline) sales for furniture and home furnishings grew 4.7%, according to data from the U.S. Department of Commerce.
Cumulative sales for 43 Health/Beauty retailers in the Top 1000 grew 23.9%, making that merchandise category the second-best performer. The growth in online sales compares with virtually flat (0.5%) overall growth for “health and personal care” sales, according to the Commerce Department.
Office Supplies was the worst-performing merchandise category in the Top 1000. Sales for the 34 retailers in that group grew 1.8% in 2017, far below the online sales growth of 18.5% for the Top 1000 as a whole. But, even at that low rate of growth, the office supply retailers in the Top 1000 significantly outperformed the overall 7.0% decrease in office supplies and stationery sales during 2017, as reported by the Commerce Department.
Here is a closer look at what’s happening among Housewares/Home Furnishings, Health/Beauty and Office Supplies retailers in the Top 1000:
Housewares/Home Furnishings
In Housewares/Home Furnishings, it’s not hard to see where the growth came from. Of the 112 retailers in this category, 16 had online sales growth of 75% or more, according to Internet Retailer data.
The fastest growth rates in the Housewares/Home Furnishings were seen among smaller retailers, such as food freeze dryer company Harvest Right LLC (No. 606), which achieved online sales growth of close to 400% and mattress seller Purple (No. 226), which more than doubled its 2016 sales. But relative retail giants had healthy sales growth as well.
For example, Wayfair Inc.—the largest retailer in the Housewares/Home Furnishings category and No. 13 in the Top 1000—had sales growth above 40%. Newell Brands (No. 30), the owner of Rubbermaid products and other brands, saw its online sales nearly double last year.
The solid growth of home goods retailers in the Top 1000 comes at a time when competition from mass-market retailers—notably Amazon.com Inc. (No. 1 in the Top 1000)—has been increasing. In November 2017, Amazon debuted two private-label brands of furniture and home goods—Stone & Beam and Rivet. At that time, the e-commerce giant said home furnishings was one of its fastest-growing product categories.
A 2017 study from retail analytics firm One Click Retail shows Amazon and its marketplace sellers sold nearly $7 billion worth of home goods to U.S. consumers in 2016, a 33% jump from 2015, and accounted for about 28% of the online home goods and housewares market.
Health/Beauty
The overall growth of the Health/Beauty retailers in the Top 1000 was helped by the rapid growth of the makeup and skincare brand and retailer Glossier Inc. (N0. 175). Glossier’s sales grew nearly 300% in 2017, following a roughly 600% growth a year earlier. Glossier in February closed a $52 million series C round of funding, bringing its total raised to $86.4 million.
In 2017, Glossier expanded into the United Kingdom and Canada. The company also opened offices in London and Montreal after acquiring the Canadian tech agency Dynamo. Customers can buy Glossier products through its website and at the company’s New York showroom. The mainly online retailer opened a store in Los Angeles in April. It also has operated pop-up shops in London and San Francisco.
But Glossier was hardly the only Top 1000 retailer in Health/Beauty to do well. In all, five (mostly smaller) retailers in this group had sales growth exceeding 60%. Among the bigger players, standouts included The Estee Lauder Cos. Inc. (No. 70) and iHerb Inc. (No. 49), which had online sales growth of more than 30% in 2017.
“They’ve done a great job of foreseeing the change,” Jason Gere, an analyst at KeyBanc Capital Markets Inc., said about Estee Lauder earlier this year. The beauty retailer has been ahead of the rest of the industry in its digital efforts for five years now, he said.
That’s no accident. Estee Lauder’s management has made online growth a top priority. “Our digital-first mindset continues to influence everything we do,” CEO Fabrizio Freda said May 2 during a third-quarter earnings call with Wall Street analysts. “Our brands are finding new ways to engage consumers by using big data to inform trends, paired with the right influencers and create impactful content.
“To stay at the forefront,” Freda said during the call, “we are adding digital talent, leveraging new technology like augmented reality, monitor real-time campaign analytics across all brands and directing more advertising spending to search influencers and mobile-first videos.”
Despite the healthy growth, Health/Beauty retailers would be wise to keep an eye on Amazon.
In the first quarter of 2018 alone, One Click Retail says Amazon sold $1.9 billion health and personal care items and about $900 million in beauty products. In each case, those figures represent a year-over-year growth rate of at least 30%.
Office Supplies
The overall growth of the Office Supplies category was hurt by lackluster performances by some of its biggest members. Online sales for Staples Inc., the biggest Top 1000 retailer in the category and No. 5 in the Top 1000, declined more than 5% in 2017. At Office Depot Inc. (No. 14), online sales grew less than 1%. Of the 34 retailers in the group, sales for 14 decreased or grew less than 10%.
Amazon, meanwhile, has made an aggressive effort to expand its business-to-business office-supply operation. For example, late in 2017, Amazon launched Business Prime Shipping, a multi-user, paid annual membership program for business customers. Also, it has been reported that Amazon has been in talks with banks including JPMorgan Chase & Co. on a co-branded credit card for small-business owners.
One Click Retail estimates Amazon sold about $2.9 billion in office supplies in 2017, a more than 30% increase compared with 2016.
A March report from One Click Retail estimates Amazon sold about $2.9 billion in office supplies in 2017, a more than 30% increase compared with 2016.
Given the harsh realities of the office supply business, it’s not surprising that Staples and Office Depot are both changing the ways they operate—pivoting away from selling office supplies based on price and seeking to emphasize services they can offer to small and mid-sized businesses.
In June 2017, Staples, which had been a public company, was acquired and taken private by private equity firm Sycamore Partners for about $6.9 billion. Prior to that, Staples had started an initiative toward rebranding itself with a stronger focus on selling a wide range of products and services to businesses.
“We wanted to tell a new Staples story,” Frank Bifulco, the company’s chief marketing officer said at the time the rebranding was launched. “It’s going to convey to all audiences that Staples is much more than a retail office-supply company.”
At Office Depot, total 2017 fell 7.1%. In an earnings call with Wall Street analysts, CEO Gerry Smith pointed to a future more focused on business customers. “We’re known as a retailer, but really … 60% of our business is already B2B,” he said on a call with stock analysts last week covering the fourth quarter and fiscal year ended Dec. 30, according to a transcript from Seeking Alpha.
One key part of that strategy is CompuCom, a provider of information technology services that Office Depot acquired in the fourth quarter of 2017. Another core element is BizBox, which Office Depot launched late last year. Available via MyBizBox.com are such services as website design and hosting, digital marketing and online applications for managing such operations as finance, accounting, HR, CRM and payroll—“and potentially in the future, more and more services as well,” Smith said.
The 2018 edition of the Top 1000 is available as a PDF report or in an online database format. The 120-page 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 an in-depth analysis of key e-commerce metrics, such as conversion rates and average tickets, by merchant types and retail categories. The report also includes a list of the Top 1000 companies.
Also, Digital Commerce 360 Premium Members get access to all Internet Retailer reports, including the 2018 Top 1000 and Top 500 analysis reports. To learn more about Premium Memberships, click here.
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