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Online Retail Sales Come of Age, Make Same-Store Sales Debut

Thursday, 3 Mar 2011 | 2:18 PM ET

Macy's reported an impressive 30.9 percent gain in sales at its Macy's and Bloomingdales' Web sites last month.

That growth contributed to the department store's ability to outpace analysts' estimates for February, with a 5.8 percent gain in the company's same-store sales.

Macy's online growth has been impressive. Online sales rose 29 growth in 2010 from 2009. The prior year, the business grew 20 percent on the back of 29 percent growth in 2008.

How are some of its competitors doing online? Well, that question is a little to tough to answer because not all retailers break out their online sales.

Macy's is a rare example of a retailer that provides this information on a monthly basis when it reports its same-store sales. Online sales are included in its same-store sales total and the company also provides the percentage growth for the online unit itself.

But most other retailers continue to omit online sales from the same-store sales picture. Typically, they provide the same-store sales growth of physical stores that have been open at least 12 months, but they also have leeway to omit certain stores—perhaps those undergoing renovations—even if they have been open more than a year.

With the release of February sales reports, Nordstrom and Gap are now including online sales consolidated within their monthly same-store sales tallies.

While those who track the retail industry agree that there are plenty of good reasons to include the online sales, the fact that not all retailers do is yet another way the monthly sales data is skewed.

"Retailing is all about multi-channel," said Brian Sozzi, a retail industry analyst at Wall Street Strategies. He expects this will be the next evolution of the way these numbers are reported.

Also, he said, after years and years of growth, online businesses are now approaching critical mass. In other words, these results are starting to matter.

"E-commerce is becoming more mainstream, it's not novel anymore. Everyone's got a dotcom." -Deloitte Consulting, US retail practice leader, Alison Paul

For most retailers, online sales can be between 8 percent and 10 percent of their total sales, depending on what type of business they are in, said Andrew Lipsman, director of Industry Analysis at ComScore. "It's even higher in some categories," he said.

Dollars are shifting away from physical stores to the online stores, and not including the online business paints a worse picture about the total business, Lipsman said.

Macy's, for example, rang-up more than $1 billion in sales last year at macys.comand bloomingdales.com. The company has total sales of about $25 billion last year.

That said, it should be noted that retailers are shifting to this mode of reporting at an interesting time. At the moment, the industry is facing some significant headwinds. Gasoline prices are rising. The cost of cotton is pushing up apparel costs. Personal income growth has been lackluster and the employment picture is still cloudy. But online sales have been rosy, and can provide retailers with something positive to talk about.

"Like any public company, retailers, they have to continue to feed the beast," said Alison Paul, leader of the US retail practice at Deloitte Consulting.

"It can be a very positive message for retailers," Paul said, to highlight the growth of their online operations.

These results also are relevant, she said.

"E-commerce is becoming more mainstream, it's not novel anymore," Paul said. "Everyone's got a dotcom."

Retailers who are consolidating the businesses say it is just the way they are looking at their operations.

"Our customers are more agnostic about where they shop," said Emily Russell, a spokeswoman for Gap.

Nordstrom echoed this. "The consolidation of full-line and direct sales reflects the recognition that the customer does not differentiate between the two channels, and is consistent with how the company plans and manages the business," the company said in its monthly sales release Thursday morning.

Macy's spokesman Jim Sluzewski said Macy's views both pieces as part of the same business. He adds, the retailer directs customers at its stores to its online sites when necessary as well as directing its customers on its Web sites to its stores.

"Consumers are going to shop based on their needs," Lipsman said.

Shifting consumers online also helps retailers manage their inventory, particularly at a time when retailers want to control their inventory levels or are switching to smaller format stores that will sometimes won't be able to accomodate large amounts of stock.

Sozzi also sees retailers using their Web sites to experiment with new product lines and to improve their margins by being more selective with the way consumers are targeted during sales promotions.

Questions? Comments? Email us at consumernation@cnbc.com

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