Online Retailers Holding Their Own During Recession
Retail sales are down all over the world. But online sales have suffered less
from the slowdown than the bricks and mortar stores. And with all the unbelievable sales and discounts that are available now, consumers are tempted into buying so they don't miss a fantastic bargain.
Despite the slowdown, Amazon.com is doing startlingly well and Blue Nile is solid, but not all online pure-play retailers are healthy. Multichannel retailers and big brands have an advantage because they have deep pockets and are trusted and well-known, said Mulpuru, noting Macy's Inc. and Gap Inc. have reported double-digit growth online for several seasons even as their brick-and-mortar operations suffer in the recession.
Amazon, which includes contemporary retailer Shopbop and shoe store Endless, has grown into a huge powerhouse doing almost $20 billion a year with about $645 million in profit. In the fourth quarter, when some retailers were down more than 20 percent, the company had its best quarter ever and brought in $6.7 billion in revenues, an increase of 18 percent over the same period a year earlier. Net income did not grow as fast as in previous quarters but was up 9 percent to $225 million, some of which was due to the popularity of the Kindle, Amazon's e-book reader. Gross margin was 20.66 percent.
The company continued to do well this quarter, posting net income of $177 million on net sales of $4.89 billion, an increase of 24 percent and 18 percent, respectively, compared with the same quarter last year.
Shopbop has a new chief executive officer, Jeff Yurcisin. Amazon would not say when he replaced Shopbop founder Bob Lamey nor if Lamey continues in any capacity with the company.
Blue Nile pulled in $300 million in sales last year, and made a profit of $11 million, even though it was down slightly from 2007.
As for other e-tailers, Overstock generated sales of $834 million in 2008, and a small loss of $12,000.
"I always hope for no news because when the news is bad" people panic and no one wants to buy," said Melissa Payner, president and ceo of Bluefly. "Shopping makes you feel better, even if it's a little item."
Bluefly's customers are spending just as much on individual pieces, but they're purchasing fewer items per order, Payner said. "Given the promotional environment, I think they're almost drunk with buying power. Before it was an impulse purchase and now it's much more considered," with consumers experimenting with putting things into their cart and taking them out again over a long period, she said.
Retailers are cautiously optimistic about the future, but there's no question that difficult times are still ahead. Most analysts don't expect a major turnaround in the economy anytime soon, and spending isn't going to rise significantly until the unemployment situation improves.
