Top 500 web-only growth is both flashy and social

May 6, 2013 02:30 PM

Flash sales and daily deals, along with social media marketing, are fueling the most vigorous  growth among web-only retailers in this year’s Top 500 Guide—at least for now.

The new edition of the rankings—anchored by Internet Retailer’s original research, which goes back a decade—shows that Groupon Inc. grew faster than other web-only retailers. The daily deal operator (No. 65 in the Top 500) took in $454.7 million in 2012 sales, up 2086.1% from $20.8 million in 2011. The revenue comes from the company’s Groupon Goods segment, which sells merchandise via flash sales instead of Groupon’s vouchers for discounted services and goods. Groupon Goods is among the few bright spots for a company that posted a $67.4 million net loss in 2012, and soon after ousted its CEO, Andrew Mason.

By comparison, Inc., the biggest web-only retailer of them all, increased its year-over-year sales 27.1% in 2012. Over the 10 years of the Top 500 Guide, web-only retailers have an annual compound growth rate of 28.3%. For the 27 web-only merchants who’ve made the cut in each of those years, that rate stands at 27.1%—more than the growth rate for retail chains, consumer brand manufacturers and catalogers. Amazon brings up the web-only category with a compound annual growth rate of 30.9% over the decade and the largest sales of any online retailers, giving its growth the greatest weight of any company. Together, those 27 web-only merchants took in more than $71.47 billion in sales in 2012. Excluding Amazon, web-only merchants that have populated the guide during its 10-year run had sales of more than $10.38 billion in 2012, a 268.5% increase from 2003.

In this year’s Top 500 rankings, (No. 202) came in second behind Groupon for web-only growth. The 3-year-old retailer, which sells such products as clothes, jewelry, kitchen tools and electronics through daily limited-time sales, took in $100 million last year, up 1023.6% from 2011.

The substantial discounts it offers don’t get all the credit for the growth, says founder and CEO Deepak Agarwal. Much of it comes from shoppers telling their friends about the deals—the e-retailer gives customers credits for referring other consumers to the site—and from Facebook, one of NoMoreRack’s prime marketing tools. For instance, the retailer lets consumers who are its fans on Facebook enter product-giveaway contests; one such prize was a $349 tablet computer. Such enticements are aimed at helping the retailer add to its  more than 1 million Facebook Likes. “Social media is a key driver for NoMoreRack’s success, and a perfect platform to engage and connect with our loyal customer base,” Agarwal says.

Third-place flash-sale retailer (No. 150) goes so far as describing itself as an “e-commerce site based on Facebook,” thanks in part to its own social media incentives, which include cash to consumers who share its products on the social network. With Internet Retailer-estimated 2012 sales of $150,000,000, its year-over-year growth rate stands at 653.8%.

The question for this year is how well its new business model will appeal to consumers. Last week, the e-retailer, which sells design-oriented items such as furniture and apparel, said it would shift its focus from flash sales to selling products on an ongoing basis—’s inventory has grown to 15,000 SKUs from 2,000 in early 2012. The web-only retailer is backing its new focus with an e-commerce site redesign that features shop-by-category and shop-by-designer navigation, along with better product recommendations, among other features. The moves reflect the fact that earns only about a third of its revenue from flash sales.

Its drive to become the “world’s number one design store” also will include an emphasis on mobile commerce, which accounts for a third of’s sales. That includes planned new shopping apps for iPad and iPhone. And is not alone among the big web-only gainers in paying more attention to wooing mobile shoppers in 2013.—which gains about 35% of its traffic via mobile but no more than 10% of its sales—will launch within the next couple of months a mobile site along with apps for the iPad, iPhones and Android phones, Agarwal says.

To read previous Top 500 Insider stories, click here.





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