Midsized e-retailers lead Top 500 growth parade
April 15, 2015 06:00 AM
There’s plenty of room for growth for web merchants ranked in the middle of Internet Retailer’s newly published 2015 Top Guide. In fact it was the 100 web merchants with annual sales that range from $74 million to $42 million that as a group grew the fastest relative to other 100-retailer segments of the Top 500.
The retailers ranked Nos. 301 to 400 grew their combined annual e-commerce revenue 18.5% to $5.57 billion in 2014. That group is followed by retailers ranked 1-100 and 101-200, which each grew year over year 15.8% to online sales of $254.61 billion and $22.89 billion, respectively. Merchants ranked 401 to 500 were up 15.5% to web sales of $3.36 billion and merchants from 201-300 were up 12.7% to collective web sales of $10.10 billion.
Some of the growth among the Top 100 merchants was the result of major acquisitions. Hudson’s Bay Co. (No. 97) grew web sales 87% to $400.2 million last year primarily because of its deal to purchase Saks Inc. for $2.4 billion in July 2013. 1-800-Flowers.com Inc. (No. 56) and Advance Auto Parts Inc. (No. 74) also grew in 2014 in large part through acquisitions. Last year 1-800-Flowers grew e-commerce 51.3% to $815 million from $538.5 million in 2013 mainly by acquiring Harry & David Holdings Inc. for $143 million in September. Advance Auto, meanwhile, grew online sales by 50.1% to $600.5 million, aided by its $2 billion purchase of General Parts International Inc. in October 2013.
And even though Staples Inc. (No. 4) and Office Depot (No. 8) are ranked separately in the 2015 Top 500 Guide because their proposed $1.17 billion deal announced in February has yet to be finalized, a combined Staples/Office Depot operating under the Staples brand would have combined Internet Retailer-estimated annual web sales of more than $15 billion and total combined sales of $34.35 billion. Those combined numbers would make Staples easily the biggest office supplies retailer online and off.
But some of the fast-growing, mid-tier Top 500 merchants are growing by carving out a specific niche and developing a unique e-commerce business model that customers find appealing.
A prime example is Dollar Shave Club (No. 319), an online seller of razors and grooming products, which launched in late 2011. The company began with upstart founder and CEO Michael Dubin using social media and TV infomercials to promote a cheaper alternative to high-priced razor blades. The company advertised it would give subscriberssimple disposable twin-blade razors with a lubricating strip and a year’s supply of 60 blade cartridges for $1 a month, far below the prices of industry leaders like Gillette, a business owned by Procter & Gamble.
The company now has 1.7 million subscribers, Dubin says, men and women who want a cheaper way to shave and the convenience of getting regular deliveries of blades and other personal care products. Dollar Shave Club’s online growth strategy is to become the premier web merchant of a range of quality but affordable skin care products, including unique items such as skin cream and other post-shave products priced at $9 compared with more expensive department store brands. “We want to own the bathroom cabinet,” Dubin says.
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