US Research: Direct Marketers Dominate E-Commerce; Department Stores Forefront of Omnichannel

According to new research conducted by eMarketer, US retail e-commerce sales of apparel and accessories will reach US$60 billion next year, a 17.2 percent share of total US retail e-commerce.

US Apparel and Accessories Retail Ecommerce Sales, 2013-2018 (billions, % change and % of total retail ecommerce sales)
E-commerce sales have continued to increase over the past five years for apparel and accessory retailers in the US.

While consumers are faced with a range of retail choices when shopping for apparel from discount stores to department stores, from fast fashion to luxury, apparel-specific retailers are seeing a higher percentage of revenues coming from e-commerce according to the report entitled Apparel Retailers and Digital Commerce: Trends and Benchmarks.

Additionally, the research showed that almost all of the leading e-commerce retailers (as measured by e-commerce as a percentage of revenues) in this product segment are known for having translated mail-order businesses online. Lands’ End, J.Crew, Free People, Anthropologie, Urban Outfitters and Victoria’s Secret include catalogue sales in the e-commerce figure.

While a background in catalogue retailing isn’t a guarantee for success, multichannel retailers with strong direct-mail roots, such as a J.Crew or an Urban Outfitters brand, 
can command as much as 30 percent of sales digitally, while mid-tier 
 retailers like Gap sit around the 10 percent to 15 percent mark.

Shoes and teen-focused retailers generally record smaller proportions of sales via e-commerce.

In-Store and Ecommerce Revenues for Select US Apparel Retailers, Jan 2015
A comparison of e-commerce versus in-store sales indicates the growing share online sales plays for US retailers.

The apparel retailer with the highest e-commerce rate for the 12-month period ending January 31, 2015, was Lands’ End, with direct sales (via digital and catalogue) drawing a vast majority of its revenues (84.9 percent). During the 12-month period, the retailer’s e-commerce sales grew 1.3 percent to US$1.32 billion, while retail store sales shrunk 9.4 percent.

Other strong performers included Urban Outfitters’ brands – Urban Outfitters, Anthropologie and Free People – with e-commerce accounting for around 29 percent of total revenues in the January-to-January period.

Omnichannel Remains Omnipresent for Department Stores

While e-commerce sales are still less than 15 percent of revenues for most department stores in the sector, many that have taken steps toward digital-physical integration as part of an attempt to adjust business strategies for the digital age.

According to eMarketer’s report, Department Stores and Digital Commerce: Trends and Benchmarks, department stores are at the forefront of using traditional spaces as a value add rather than a detriment when competing against online pureplays.

As Jodie Fox of custom footwear company Shoes of Prey relayed at yesterday’s ARA Retail Awards, the face-to-face aspect that comes with having a physical touchpoint with consumers will never be replaced and, as such, department stores are finding great advantages in their physical locations.

US Department Store Retail Sales, 2004-2014 (billions and % of total retail sales*)
Department store sales as a percentage of total sales have declined over the past ten years.

Using digital innovations to enhance the in-store shopping experience is an extension of the omnichannel approach, and one epitomised well in the case of US luxury department store Nordstrom. In a 
Q4 2014 earnings call, Nordstrom co-president Erik Nordstrom mentioned that allowing in-store returns
 of merchandise purchased digitally was a strategy starting to show results.

“Well over 60 percent of our Nordstrom.com returns end up at our full-line stores, and well over 70 percent HauteLook and Nordstrom Rack returns end up at our Rack stores,” he reported.

Additionally, those in-store returns equaled increased foot traffic for Nordstrom Rack that amounted to an additional one million retail visits in last year, an important influencer in potential impulse purchases

According to Marshal Cohen, Chief Industry Analyst at The NPD Group. “The retailers need you in the store, particularly the department stores. Forty-seven percent of consumers buy on impulse in the store. Online, they only buy 25 percent on impulse. So, where would I rather have you if I’m a store owner?”

Nordstrom 
has been able to blend online and offline by adding Guideshops for once online-only menswear retailer Bonobos and more recently in-store studios featuring products from Aussie’s Shoes of Prey. From SMS purchasing to beacons sending real-time offers to smartphones, interactive dressing room mirrors and visual search, Nordstrom aims to stay ahead of digital trends and be a leader in the omnichannel space.

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