When the coronavirus moved a large portion of consumer spending to the web, many—but not all—small e-retailers benefitted.
The influx of new online spending during the pandemic boosted sales for many retailers listed in the 2020 Digital Commerce 360 Next 1000, our database of North American retailers that rank Nos. 1001-2000 based on 2019 online sales. When COVID-19 caused states to shut down most physical stores, sales surged for many of the Next 1000 merchants that sell primarily online. The shutdowns also boosted online sales for store-based retailers, but typically not enough to make up for lost revenue from brick-and-mortar locations.
Black Friday sales levels
When the coronavirus hit, some Next 1000 retailers that sell exclusively online experienced sales volatility, but ultimately did well. For example, in March 2020, as states began issuing stay-at-home orders, sales at web-only apparel retailer Phoenix Leather Goods (No. 1486 in the 2020 Next 1000) dropped so much that company executives worried about its survival, says Brad Rusin, director of ecommerce. But in April, he says, sales soared for the retailer—which operates apparel and accessories websites BeltOutlet.com, TrafalgarStore.com and CrookhornDavis.com.
“Bandana sales absolutely skyrocketed,” Rusin says. Many consumers used bandanas as required face coverings during the pandemic, and sales of those products represented about 50% of all of Phoenix Leather Goods’ sales in April. On May 1, Phoenix Leather introduced a line of face masks, which also sold well, he says. The retailer also experiences brisk sales of sleepwear products and slippers, possibly a byproduct of many Americans still working from home and wanting to do so in comfort.
Sales were nearly at Black Friday levels for a couple of weeks in April, Rusin says, requiring the retailer to redeploy employees to implement an “all-hands-on-deck” approach to fulfilling orders. Phoenix Leather’s online sales grew 40% in April and May compared with 2019, Rusin says. From the end of May through early September 2020, sales have been 20% to 25% ahead of 2019’s pace, he says. “That’s almost completely based on brick-and-mortar stores closing,” Rusin says.
Most kinds of stores closed during the pandemic’s peak and as of August, consumers remained reluctant to engage in out-of-home activities such as shopping in stores. That wasn’t good for jewelry store chains but presented a significant opportunity for online-only jewelry retailers like Allurez (No. 1570). As of early September 2020, year-over-year sales were up about 80%, says CEO Raphi Mahgerefteh.
He attributes a good part of that growth to a continuing demand for bridal jewelry—Allurez’s specialty—when coronavirus-related lockdowns constrained in-store shopping–and after that, consumer hesitancy to enter stores.
“People are still getting engaged and getting married,” Mahgerefteh says. And because the coronavirus prompts many couples to throw smaller weddings and forgo honeymoon trips, at least some have more to spend on engagements rings and wedding bands, he says. That, Mahgerefteh believes, explains why Allurez’s average order volume grew 10% to 15% during the coronavirus pandemic—even as the mix of products sold remained about the same.
The sales growth was a relief, Mahgerefteh says, because the pandemic caused a great deal of uncertainty. “We thought the situation would be a lot worse,” he says. In the future, Mahgerefteh thinks many of the retailer’s new customers will like the process of shopping online and will continue to buy from Allurez.
Allurez, founded in 2010, sets itself apart by making its jewelry customizable. Shoppers have the option of altering almost any item on its website to meet their exact needs. If nothing seems close enough to what they want to buy, customers can design something from scratch using online tools.
The Allurez website also includes an extensive education section. The section comprises buying guides on diamonds, precious metals, wedding bands, and other topics, along with articles on jewelry symbolism issues and how to be a bridesmaid.
For denim brand Revtown, the pandemic presented an unexpected challenge to its plan to increase sales 500% to 600% in 2020. It will probably have to settle for doubling or tripling its sales instead.
The retailer’s anticipated growth rate for 2020 would have matched or exceeded its 550% year-over-year growth in 2019, says CEO Henry Stafford. However, the pandemic brought with it a shrinking economy, along with supply-chain issues that meant some popular products were sometimes out of stock, at least in some sizes, Stafford says. But throughout the COVID-19 crisis, Revtown increased its advertising, Stafford says, without providing specifics. He’s confident 2021 will restore the level of growth the brand saw in 2019.
“You’ve got to be optimistic,” Stafford says. He says the retailer’s focus is on keeping its brand alive and taking care of its staff. He says Revtown has not laid off employees during the pandemic and does not plan to.
The pandemic walloped Build-A-Bear, then it bounced back
For many store-based retailers, the first half of 2020 brought hard times. A good example is Build-A-Bear Workshop Inc., a retail chain heavily dependent on its network of more than 500 worldwide stores, most of which were temporarily closed for most of the first half of 2020.
In August, with about 90% of its stores reopened, publicly traded Build-A-Bear (No. 1036) reported that it recaptured more than 80% of sales its brick-and-mortar shops had previously made. But from mid-March through August 1, things were ugly. For example, despite a 299% increase in ecommerce sales, Build-A-Bear reported revenue was $40.4 million for its second fiscal quarter ended Aug. 1, 2020, about half of the $79.2 million in revenue for the comparable period in 2019.
With stores closed, Build-A-Bear furloughed furlough 90% of its staff starting March 29, 2020, cut salaries 20% for the rest of its workforce and took other steps to save cash.
The retailer said the reduction in sales reflected 60% fewer operating days than in the year-ago quarter, driven by temporary store closures due to the pandemic. The retailer reported a $13.9 million net loss for the quarter, compared with a $1.2 million net loss in the fiscal 2019 second quarter. For the six months ended Aug. 1, 2020, the retailer reported revenue of about $87.0 million, down 49% for the comparable 2019 period. The retailer reported a net loss of $35.1 million for the six months, compared with a $28,000 net loss for the year-ago period.
In a conference call with analysts on Sept. 1, 2020, Build-A-Bear CEO Sharon Price John said the retailer negotiated rent reductions and other concessions from landlords for approximately 95% of its stores. To shore up its liquidity, Build-A-Bear also negotiated a new five-year $25 million credit line with PNC Bank.
Retailers in the Next 1000, generated 2019 online revenue that ranged from more than $1 million to just under $30 million. They span all 14 product categories and four merchant types Digital Commerce 360 tracks.
This article includes analysis from the Digital Commerce 360 2020 Next 1000 report. The report offers a detailed look at the Next 1000 retailers. The 97-page report includes:
- A full ranking of the Next 1000 retailers, 1001-2000.
- More than 35 charts and graphs analyzing demographics, mobile traffic, conversion rate, average ticket and more.
- Data on the Next 1000 retailers broken up by merchandise category and merchant type, including growth rate and web sales.
- Breakout sections on the online leaders and DNVBs that make up this unique group of retailers.
- Case studies on five Next 1000 retailers.
- An analysis of COVID-19 response and impact on ecommerce operations.
You can learn how to purchase the 2020 Next 1000 Report here.