E-Commerce Up, Pureplay Online Down

The vast majority of major multi-channel retailers enjoyed increased online sales during the first quarter of 2009, but their success might have come at the expense of smaller, Web-only players that didn't fare nearly as well. Forrester E-Commerce Analyst Sucharita Mulpuru said the hardest hit pure-play shops were smaller "E-Bayish" E-Tailers that couldn't compete with price-slashing by the big guns.

"My hypothesis is that, in tough times, consumers stick to brands they know which are the big multi-channel retailers," Mulpuru said. "Also, those multi-channel retailers are very aggressive with pricing now and they're discounting aggressively to maintain market share."

Forrester Research and Shop.org reported that thirteen of 15 major retailers surveyed in early April said their Web sales increased during the quarter when compared to Q1 of 2008. The researchers defined major retailers as those with at least $100 million in Web-based revenue.

The report included some sample comments from those who were surveyed and a number of them revealed a significant degree of anxiety despite the relatively good sales numbers. One store-based, multi-channel retailer said it was enduring a "difficult environment that is creating a self fulfilling event (with) lots of internet retailers discounting items and freight to drive top line revenue at any cost without concern for margin and profitability."Another, which reported conversion rates being down by 3 percent, said its "online channel is impacted by offline merchandise decisions: narrowed assortments, tighter inventories, no replenishment on select items."

Meanwhile, comments from the suffering smaller pure-plays included complaints about increased orders for smaller priced items, a large decrease in sales following stock market declines and an intensification of comparison shopping including comparisons of shipping rates and requests for discount coupons.

The numbers showed sales drops for the 23 online-only stores queried by the researchers. The study found that 61 percent of those pure-play E-Tailers saw sales decline or remain flat during the period.

Forrester and Shop.org said 58 percent of the 80 companies responding to the survey said their sales increased during the quarter while 29 percent said sales declined. Thirty three of 48 multi-channel companies (including manufacturers) reported increases in sales.

Overall, U.S. online retail sales increased an average of 11 percent during the quarter, said the report. That's a good sign, given the state of the economy during the quarter. Another reason for hope, if not joy: The survey found that 44 percent of the retailers experienced sales increases of more than 10 percent compared to Q1 2008.