Direct commerce got a boost last week when major retailers Federated Department Stores, Circuit City Stores and Restoration Hardware reaffirmed and increased their commitment to e-commerce and catalogs. Strong sales in those two channels helped make the decision easier.
Federated, for example, expects direct sales from its Macy’s and Bloomingdale’s department store brands to grow from nearly $620 million last year to more than $1 billion next year. The Cincinnati company will invest another $100 million this year in its direct channels in addition to last year’s $120 million. Some of the new money will go toward building a new warehouse in Arizona to serve as the West Coast shipping point for Macys.com.
Circuit City acknowledged that Web-originated sales and call centers were the top performers across all sales channels within the company. The Richmond, VA-based electronics retailer said Web-originated sales jumped more than 50 percent in its fiscal 2007 year to $1 billion. It expects e-commerce and call center sales to increase between 30 percent and 40 percent in fiscal 2008. Those who follow retail will remember that Circuit City was one of the pioneering retailers to offer click-and-pick, whereby orders placed online could be picked up at a Circuit City store of the consumer’s choice, if the product was in stock there.
For its part, Restoration Hardware said direct sales increasingly drive its business. The Corte Madera, CA-based specialty home furnishings retailer reported direct revenue last year grew 52 percent versus same-store sales’ 5.8 percent. The company this month launches a bed and bath catalog as well as a line of upscale children’s home furnishings supported by a catalog and Web site planned for next spring.
The commitment to e-commerce and catalogs often now comes from the top. Any journalist, analyst, vendor, customer or store associate who has met with Federated chairman and president/CEO Terry J. Lundgren quickly realizes the man knows e-commerce like the back of his hand. It’s rare to see chief executives of a multibillion-dollar corporation know the nitty-gritty of their online or catalog operations. Mr. Lundgren was the consummate expert on a panel at a recent National Retail Federation conference. He cited statistics and discussed merchandising strategies as competently as any mid-ranking e-commerce executive would.
What few people know is that Macys.com is the second-largest Macy’s store in revenue terms after the New York flagship in Herald Square. Federated’s policy to homogenize all company department stores either into the Macy’s or Bloomingdale’s brands helps increase clout and awareness. Consumer trends point to increased online shopping for the obvious reasons – greater selection, ease of browsing and buying, no sales taxes in absence of nexus, no pressure from sales associates and gift-wrapping options. Online stores like Macys.com also serve as an indicator of market trends and merchandise popularity.
Long story short, e-commerce and catalogs have earned their spurs by constantly outperforming in-store sales, albeit on a smaller base. But they also drive sales to other channels and vice versa. It takes a CEO’s stamp of approval to move direct commerce to another level, and that’s what’s happening right now.