Online sales growth hits the skids, but not as badly as total sales

Online retail sales grew 6% in the third quarter, the slowest growth on record for online sales and only half the growth of the first two quarters, comScore Inc. reported today. Online sales totaled $30 billion.

But while that news is not so great when compared to double-digit growth that online sales have enjoyed for most of their history, it was at least 12 times the growth rate of total retail sales as reported by the U.S. Department of Commerce.

The Commerce Department reports that total retail spending in the third quarter was up 0.5% from the year-earlier quarter. The total retail sales numbers continued to be skewed by the high cost of gasoline and food, which were up 17.8% and 5.1%, respectively. Gasoline and food and beverage sales represent about 30% of retail sales. Since those purchases are unlikely to ever happen online, the disparity between online growth and offline is probably even larger than 12 times.

“Consumers’ economic pressures continue to have a significant impact on retail spending, which is evident in the slowing growth rates in the online channel,” comScore chairman Gian Fulgoni says. “However, in a tight economy, the Internet remains a critical sales and media channel for retailers for three reasons. First, it is a more cost-effective medium than traditional media. Second, despite the slowdown, e-commerce growth rates still exceed those at retail. And third, online marketing campaigns have been proven to not only grow a retailer’s e-commerce sales but to also have the ability to drive increased traffic into retail stores. And, with so many consumers expected to be especially cost-conscious this holiday season, it is important for retailers to reach them at the initial point of the purchase funnel—when many product research and price comparisons are being conducted online.”

ComScore reports year-over-year monthly growth of online sales as:
2007
June, 25%
July, 22%
August, 28%
September, 19%
October, 19%
November, 20%
December, 18%
2008
January, 12%
February, 14%
March, 9%
April, 15%
May, 12%
June, 11%
July, 8%
August, 6%
September, 5%

Total retail sales were down 1.4% in September from September 2007.

Not all categories of retailers suffered equally from the slowing growth rate. ComScore reports the following increases by product category:
Video Games, Consoles & Accessories, 60%
Furniture, Appliances & Equipment, 52%
Sport & Fitness, 40%
Event Tickets, 18%
Flowers, Greetings & Misc. Gifts, 14%
Home & Garden, 6%
Consumer Electronics (excluding PC Peripherals), 1%
Computers, Peripherals & PDAs, 0%
Apparel & Accessories, -2%
Toys & Hobbies, -3%
Jewelry & Watches, -11%
Music, Movies & Videos, -29%

In addition to the sobering sales numbers, comScore reports that consumers in an October survey are pessimistic about the economy: 82% “are more afraid about the economic future than ever before.” Only 26% believe the economy will be better a year from now.

Of the 1,064 consumers asked to complete the statement, “A year from now the economy will be …” 26% said better, 24% said same, 27% said worse and 24% said they don’t know.

Adidas is rolling out a new line and retail concept for spring.

The Adidas SLVR Label will include sportswear (not performance activewear), accessories and footwear for women and men. The line will be introduced in February during New York Fashion Week with its first stand-alone store in SoHo, and a second store will open in Paris during fashion week there. Two more stand-alone stores in Los Angeles and Miami will bow during the first quarter of 2009. Each store will be between 1,000 and 1,500 square feet, and fashion week events to fete the New York and Paris shows are expected.

Additionally, in Paris and Beijing, SLVR will be sold at the new Adidas Brand Centres,…

By ANDREW HARMON

Oct. 31, 2008

LOS ANGELES — Rising action sports apparel giant Volcom still has room for growth, despite new warnings of a further economic slowdown.

Known for its loud fashion and “Youth Against Establishment” mantra, the brand beat its own revenue and profit expectations for the third quarter, but scaled back fourth-quarter expectations as it faces what may be a disastrous holiday shopping season.

For the three-month period ending Sept. 30, net income rose 11 percent to $16.3 million, or 67 cents a diluted share, compared with $14.5 million, or 59 cents a share, in the year-ago period.

Revenue increased 18.5 percent to $111.7 million, up from $91 million last year. The company had expected third-quarter revenues of $109 million to $110 million, with diluted earnings per share of between 63 cents and 64 cents.

Still, executives scaled back fourth-quarter guidance to approximately $69 million to $71 million, with fiscal year expectations of $333 million to $335 million. The company had earlier expected annual revenue of $344 million to $347 million. Volcom CFO Doug Collier declined to offer guidance for the next fiscal year, citing the uncertain retail environment.

“There’s no question the current environment is challenging, but we’re confident in our ability weather the storm,” Volcom CEO Richard Wolcott said in a Thursday conference call with analysts. “The most important focus is that we stay healthy … by keeping costs and inventory levels under control.”

For the fourth quarter, Wolcott said the company is most focused on tightening inventory, as retailers become increasingly conservative with holiday buys.

Collier concurred, asserting the brand is less interested in expanding to new retailers and more concentrated on existing retail customers.

Wolcott added that Volcom was not currently looking to further expand its vertical retail presence.

The company’s Europe segment reported a 16.8 percent revenue increase to $31 million, aided by strong sales in Germany and Austria that offset lagging performance in France, Italy and the United Kingdom. The U.S. division, which also includes Canada and Japan, saw revenue gains of 10.4 percent.

Wolcott said the company expects to take control of its Japanese distributor next month. Volcom had announced the acquisition of the distributor earlier in the quarter.

Like most youth apparel brands struggling for a foothold amidst the current market quicksand, Volcom has faced steep declines in its stock value over the past year. As of Thursday, the Costa Mesa, Calif.-based company’s stock has lost 62 percent of its value from a year ago. By comparison, competitor Quiksilver Inc. has lost 80 percent of its stock value in the past year, with shares plummeting 55 percent so far this month.

By all accounts, young American men are not exempt from budget trimming. According to a bi-annual teen consumer study by Piper Jaffray released earlier this month, overall spending among young men dropped 3 percent from a year ago, while apparel spending among teens was “essentially flat.”

In the macroeconomic climate, a government report released Thursday showed a 0.3 percent decline in gross domestic product annual rate, with consumer spending falling for the first time in 17 years.

Founded in the early 1990s and a public company since 2005, Wolcott’s Volcom shifted into acquisition mode this year. In January, the brand purchased action sports eyewear and accessories brand Electric Visual Evolution for $25.3 million. The subsidiary brand saw third-quarter sales of $7.9 million.

Volcom shares rose 7.5 percent, or 81 cents, to $11.56 in Thursday trading, with increased gains in after-hours trading.

NEW YORK — Pacific Sunwear of California Inc. Wednesday rejected extreme sports retailer Adrenalina’s second unsolicited bid to buy the company.

The sweetened proposal, reported early on Wednesday, raised the price to $5 a share in a cash and stock deal that valued the company at about $329 million.
The price represents a premium of 67 percent above the closing price of PacSun’s shares on Tuesday, or 11 percent higher than the Adrenalina’s of $4.50 a share on Oct. 20. The first offer was rejected the following day.

“We believe [PacSun’s] board acted hastily and without full consideration in rejecting our earlier offer,” said Adrenalina chief executive officer Ilia Lekach, who added that PacSun’s shares had declined 20 percent in value since the day before his company’s first offer.

PacSun called the higher offer “not in the best interests of the company’s shareholders.”

Adrenalina, which operates three stores and had just over $329,000 in cash at the end of the second quarter, said it has “identified strategic partners, wealthy individuals and institutional investors” who will provide financial support for the buyout. The company reported $3.8 million in revenue and a net loss of $5.8 million last year.

PacSun has 937 stores and $1.45 billion in revenue.

“I don’t know how they are going to do it,” said Roth Capital Partners retail analyst Liz Pierce, who noted that such a deal would be extremely difficult with tightening credit markets. “I can’t imagine the shareholders agreeing to this, but nothing is ever impossible.”

If anything, she said, this bid “draws attention to how beat-up some of these retail stocks are.”

PacSun shares closed up at $3.18 on Wednesday, a 5.7 percent increase.

By Christina Zarrello

Bucking the economic downturn, 10 retailers have found the recipe for success. Although many others are feeling the pinch, Aeropostale, Target, DSW and The Buckle have posted stellar financial results. These retailers and the others on the list have ambitious plans to open new stores throughout the remainder of 2008 and well into 2009. RIS News highlights 10 surprisingly successful retailers that are beating the odds and winning in the toughest economy in years.

Target: On October 12, the superstore announced ambitious plans to open 45 new stores, launched its first store in Alaska and debuted its 2009 prototype stores. Target’s new general-merchandise stores will be roughly 6,000 square feet larger than the current model. The new SuperTarget stores will be approximately 12,000 square feet larger than existing locations and pushes closer to the average size of Wal-Mart’s Supercenters.

Aeropostale: A favorite among teens and tweens, the apparel retailer plans to open 100 stores during the next 18 months. Aeropostale announced that its same-store sales rose 5 percent in September. Year-to-date, same-store sales rose 24.9 percent and total sales rose 32 percent to $480.4 million. The apparel retailer currently operates 565 locations nationwide, with average stores occupying spaces of 3,300 to 3,800 square feet in malls.

The Buckle: Month after month, this teen apparel chain posts impressive same-store sales increases. Despite operating 377 stores in 39 states, it gets little attention from the industry because of its relatively small market cap ($1.5 billion). In September, same-store sales rose 19.7 percent and for the five-week period ended October 4, total sales rose a healthy 26 percent to $72.8 million.

Family Dollar: The discount chain plans to open approximately 200 new stores in fiscal year 2009, which began in September. The company also plans to renovate 200 more units to its “concept renewal” format and plans to upgrade technology in about 1,300 stores. The discounter’s fourth quarter sales in fiscal 2008, which included the summer months when gasoline was at record highs and food costs soared, jumped 8.2 percent from the previous year to $1.8 billion.

RadioShack: Digital television converter boxes as well as AT&T post-paid wireless upgrade services may have given the electronics chain an edge with profits growing 8.4 percent in the third quarter ended September 30. In addition, sales rose 6.4 percent to $1.02 billion, while same store sales grew 7.7 percent. The retailer also posts solid sales of GPS navigation systems, video games and laptop computers.

DSW Shoes: The footwear retailer plans to open 10 locations across the country in October. The retailer’s plans are in line with its projected goal of 35 new locations in 2008. The 17-year-old chain operates 288 stores and supplies inventory to 381 leased locations including Stein Mart, Gordmans, Frugal Fannie’s and Filene’s Basement, as well as its Web site.

KB Toys: The toy retailer plans to open 30 seasonal stores across the country just in time for the holiday season. The new stores will augment the company’s existing base of more than 460 stores, but will close after the holidays. Although the seasonal stores are temporary, they will feature a full selection of toys, games and video games.

Tractor Supply: The farm and ranch equipment retailer announced double-digit increases in its third quarter ended September 27, citing a 13.1 percent increase in sales of animal and pet products, seasonal heating equipment and emergency response equipment related to hurricanes. Sales grew 16.6 percent to $733.9 million, while same store sales grew 6.2 percent. The retailer opened 70 new stores in the first nine months and anticipates 21 new store openings for the remainder of 2008.

Ulta Salon Cosmetics & Fragrance: The beauty products retailer plans to add 180 stores over the next two years. The chain plans to open 80 stores in 2009, 100 in 2010 and expects to be a 1,000-store chain in 2017. Ulta currently operates 283 stores. The typical Ulta store is 10,000 square feet and located in lifestyle centers.

PriceSmart: The warehouse club announces that its same-store sales for September 2008 rose 15.3 percent. Net sales climbed more than 19.8 percent to $93.6 million in September from $78.1 million reported last September. PriceSmart had 25 warehouse clubs operating at the end of September, compared to 23 warehouse clubs at the same time last year.

(Source: RIS)

Sascha Bosio, www.bosioinc.com, www.theartofemerchandising.com, www.bosioinc.com, The Daily Shopping Cart, The Art of e-Merchandising, Bosio, Inc.

By Anne D’Innocenzio, AP Business Writer

Friday, October 24, 2008

(10-24) 11:34 PDT NEW YORK, (AP) –

Online retailers — grappling with a sharp drop in consumer spending from even their most gung-ho Web enthusiasts — are becoming pushier with e-mails that pitch the latest deals.

With pleas like, “Last chance to save 20 percent,” or “Hurry, final sale ends,” retailers from pure online players to land-based stores with a Web presence are hoping to get consumers to open their wallets — quickly and in a cost-effective way.

AnnTaylor Stores Corp.’s recent e-mails promote knit tops as low as $9.99, while Saks Fifth Avenue’s e-mail messages tout up to 60 percent off on new women’s fashions. But such attempts to pump up sales threaten to drive away shoppers, who may already be starting to get bleary-eyed over the bombardment.

And if consumers are fed up with the e-mail blasts now, just wait until the holiday season gets under way in earnest — with merchants expecting to increase the pace as they do whatever they can to make their sales goals.

“I find them annoying,” said Cory Porter, a Web shopping fan from Washington D.C. who says he now receives about seven per day, twice as many as about two months ago. He had signed up with about nine retailers including Barneys New York, Banana Republic and Safeway to receive e-mail promotions, but thought they would be customized to his needs.

“I am a 32-year-old guy who lives in an urban area with no kids,” Porter said. “In other words, I don’t need blouses, high heels, or kid’s juice boxes.” As a result, he’s opted out with some stores, directing the rest to his spam account.

The frenetic pace of offers comes as Web shopping — which had held up better in the slowing economy than store-based retailing — has been starting to slow dramatically since the financial meltdown intensified in September.

Sucharita Mulpuru, an analyst at Forrester Research, expects online retailers to fare better than regular stores this holiday season because of the convenience, the breadth of selection and the perceived value. But “there is definitely a significant slowing down” in online shopping, she said, noting that the stock market tumble, weaker job market and tighter credit have spooked even the most enthusiastic Web shoppers.

Amazon.com, considered the bellwether of Web shopping, announced late Wednesday that it was slashing its full-year sales outlook, saying it had slower growth rates near the end of the quarter and now expects annual revenue below analyst expectations.

Porter, who does public relations for government contractors, noted that he slashed his spending on clothing and gadgets to $200 this month amid “all the economic uncertainty.” That compares with the $500 per month he had been spending. He said he typically does about half of his buying on the Web.

Kurt Peters, editor-in-chief of trade publication Internet Retailer, noted that stores can easily react to a sharp sales slowdown in a matter of hours by sending out e-mail blasts, which is faster and more cost-effective than redoing a mailer to consumers. Julie M. Katz, another Forrester analyst, estimates that it costs about $2 for every thousand e-mails sent. The Direct Marketers Association estimates that marketers reap $45.06 in return on investment for every dollar they spend on e-mail campaigns. That compares with $7.28 for catalogs and $15.55 for direct mail pieces.

Analysts say that during the last recession in 2001, stores didn’t have the vast data bank of consumer contacts they could mine as they do now.

Internet Retailer’s recent survey of 174 Web retailers, including those that operate stores, found that nearly half have increased the number of monthly e-mails they send compared to a year ago. Chad White, director of retail insights for the Email Experience Council, the e-mail marketing arm of the DMA, reports an 8 percent increase in the number of e-mails stores have sent for the week ended Oct. 17, compared to the same week a year earlier.

Overall, Forrester predicts that retailers and wholesalers will send 158 billion marketing e-mails this year; that’s expected to increase 63 percent to 258 billion in 2013. At the same time, consumers are becoming turned off with e-mail. Forrester said it is finding that online consumers were annoyed with e-mail volume and are beginning to turn to social networking sites, texting and other communication channels.

Michael Wagner, CEO of etoys.com, said e-mail campaigns drive about 12 percent of overall revenue but noted that he’s not sure if they will do more this holiday season than last year. “We are concerned about exhausting the customer,” he said.

The big problem, according to Stephanie Miller, vice president of market development for consulting group Return Path Inc., is that less than 20 percent of retailers’ e-mails are customized even though stores have the capability of targeting their messages. She thinks it’s because marketers don’t get the resources they need. That will change, she said, because just stepping up the frequency is not going to work in this challenging environment.

Dan de Grandpre, founder of dealnews.com, a site that keeps track of store bargains, said that he’s noticed that stores are sending out more reminders and are blasting e-mails that offer discounts across many categories instead of just one item. The bulk of the e-mails are coming from apparel and furnishings chains, which have been hardest hit by the economic slowdown as shoppers cut back on non-essentials.

Forrester’s Katz expects that stores may pull back on e-mail campaigns after the holiday season; she added such programs still cost companies a “chunk of change” given the millions of e-mails they send out.

“Consumers just don’t have the dollars. The reality is going to sink in,” she said.

(Source: www.sfgate.com)

Gift card sales are desirable for both retailer and consumer for several reasons. As we mentioned last year, gift cards topped consumer wish lists with 53.8% of adults over 18 indicating they’d like to receive one (BIGResearch and the National Retail Foundation), and the average shopper purchasing 5 gift cards for others.

Gift cards are usually free to ship, and often recipients end up spending more or less than the full value of the card.

Read full article on Get Elastic Blog…

Extreme sports chain Adrenalina has taken a bid to buy Pacific Sunwear of California Inc. to the company’s board of directors after being turned down by chief executive officer Sally Frame Kasaks.

In a letter to Kasaks dated Oct. 17, Adrenalina chairman and ceo Ilia Lekach offered to purchase all issued and outstanding shares of common stock of Pacific Sunwear at a price of $4.50 per share, 24.3 percent greater than the stock’s Oct. 17 closing value of $3.62. Adrenalina submitted the proposal to the Pacific Sunwear board after Kasaks repeatedly declined the offer, Lekach said.

“We are confident that this transaction will create value for PacSun shareholders well in excess of that which can be achieved by your company proceeding on its own,” Lekach wrote. “Not only does the proposed acquisition price represent a premium to the current price of PacSun shares, but the stock structure of the transaction would allow your shareholders to participate in the future growth and performance of the energized combined companies.”

(Source: DNR)

October 2008 | While endlessly fantasizing about The Next Big Thing in the wondrous world of consumerism can be inspiring, execution beats everything. Which is why an easy-to-apply micro-trend like the rising importance of perks and benefits should be on your radar this month and beyond.

Warning: 2009 is only two months away. What better way than to get ready than to secure a serious dose of emerging trends that haven’t been covered in our briefings? Check out the 2009 edition of our annual Trend Report, now available for pre-ordering. Early-bird discount included.

More information at www.trendwatching.com/trendreport »

Online retailers who fail to make the most out of their e-commerce offerings are losing out on £2.3bn in revenue each year, according to a new report.

‘How to pull customers online’, a report produced by Verdict Consulting for Webloyalty, argues that many online retailers are allowing shoppers to slip through their fingers. The report calculates that an e-commerce site converting just one per cent more visitors into paying customers could generate an additional £678m in revenue.

Also included in the report is an assessment of strategies for winning customers in the competitive online environment. It examines six key stages of building successful online relationships, including how to attract customers, how to sell to them and how to increase their loyalty.

Despite some gloomy findings, the report goes on to argue that the online retail industry is set to grow 129 per cent in next five years. Internet sales currently represent 6.7 per cent of all retail spend in the UK, equal to £19.4bn. By 2012, Verdict forecasts this to reach 13.6 per cent of all UK retail sales, with a value of over £44bn.

However, the research shows that levels of online loyalty are 10 per cent lower than in physical shops.

Consulting director at Verdict Neil Saunders comments: “Standing out from the crowd on the internet has become more of a challenge. Online retailers have to work harder than ever to attract consumers. This is not a challenge restricted to smaller sites - big players face the same issue. They all need to be more creative about customer acquisition. Old methods of driving traffic still have their place, but are increasingly being replaced by new strategies.”

Webloyalty managing director Europe Martin Child says: “Offline, retailers have become sophisticated at utilising space in their stores to generate incremental revenue. It is all about leveraging their high levels of footfall. The same principle applies online, where web traffic can help generate much-needed incremental revenue for retailers.”

(Source: Precision Marketing)