Call it the next stage in the evolution of brick-and-mortar chains from traditional store-based retailers to multichannel merchants.
Chains such as Sears, J.C. Penney and Wal-Mart have been online for a few years with a limited selection of categories, but it was only recently that all three announced plans to pursue online apparel sales in a big way. Online selling is gaining momentum at high-end stores as well, with upscale merchants such as Marshall Field's and Bergdorf Goodman planning to start e-commerce sites this fall.
“Multichannel retailers are seeing 20 percent growth in some cases while in traditional retail, you can't get 20 percent growth in same-store sales,” said Kelly Mooney, president of Resource Interactive, Columbus, OH, an interactive marketing company.
It was a banner year for Internet sales in 2003. Overall online sales surpassed $100 billion for the first time, with apparel one of the fastest-growing categories, according to Forrester Research. Internet-based merchants, in aggregate, became profitable for the first time last year.
“Those are very significant milestones, and ones that a CEO [of a big retail chain] is going to take notice of,” said Scott Silverman, executive director of Shop.org, a trade association for online merchants.
The relatively small sales potential online just a few years ago didn't make it worthwhile for these companies to invest significantly in the infrastructure to handle complex categories like apparel. A Web site needs to provide photographs from various angles, zoom capability and information such as product availability and washing instructions. From the fashion standpoint, timeliness is key.
Now, they can't afford to ignore online apparel. Sears and Wal-Mart have reported that “apparel” is one of the top search words on their sites.
Wal-Mart learned the hard way that apparel has its own challenges. The retailer introduced apparel online in 2000 with a limited selection but quickly realized it couldn't support the endeavor from a fulfillment and stock standpoint and got out in 2001. Three years later, after working out the kinks, apparel was reintroduced a month ago with a wider selection that includes classic and fashion-forward styles.
“One of the reasons that Wal-Mart failed the first time was that their assortment was too small,” Mooney said. Now that “retailers have seen some success in categories that are easier to implement, they can take that experience to apparel.”
Silverman added that the income gap between the online shopper and the average shopper is closing. Whereas online shoppers once had a higher-than-average income, today their income is near the national average.
E-commerce also is an important way to reach younger consumers and women, who constitute an increasing percentage of online shoppers.
“There is a younger customer on the Internet who is getting married and starting a family,” said Richard Last, vice president of merchandising at JCPenney.com, when asked about his company's efforts to build its online business.
Penney introduced customized clothing to its site in June and a custom engagement ring option earlier in the year. According to Women's Wear Daily, JCPenney.com hopes to increase Web sales to $1 billion by 2006 from $650 million last year by showcasing trendier fashions and improving the site's visuals and technology.
Online sales also can drive consumers to another channel. If a consumer orders an item online and then returns it to a store, this provides another chance to create a positive experience for that consumer and gain an incremental sale. Retailers have a deeper understanding of what can be done with the information they gather online, such as promoting an item that's selling well or sending targeted e-mails.
Wal-Mart is taking a multichannel approach to tout its online apparel. There are signs in the apparel department and TV spots on monitors in various departments. It also is mentioned in the chain's monthly newspaper circular and on Walmart.com's home page. E-mail announcements are going to registered Walmart.com users.
JCPenney.com will promote its custom apparel option this fall through e-mail alerts and in its catalogs.
Sears, plagued by weak apparel sales and out-of-stocks on key items in its stores, likely will look to profit from the experience of Lands' End as it prepares to launch a full selection of clothing online in September. Lands' End reportedly does 40 percent of its business online.
Several other factors will influence the success Sears, J.C. Penney and Wal-Mart experience selling apparel online. One solution they will count on is the ability to offer a range of sizes on their sites that are unavailable in their stores. The Web provides “a great opportunity to get the petite or plus-sized customer,” said Lauren Freedman, president of The E-tailing Group, an e-commerce consultancy.
But Mooney wondered whether consumers will buy basics online when they can drive to a Wal-Mart in five minutes.
J.C. Penney sees customization as a strategy to help build sales for its Web site and increase customer loyalty. If custom apparel is successful, the company might extend the option to other apparel and product categories such as window dressings.
Given the right formula, each of these merchants has a chance to build sales online, Freedman said.