Department Stores Dabble Online but Stay Wary of the Web
Nordstrom Inc.’s new online store offers just two men’s dress shirts, both under the store’s private label, and both white.
Macy’s just-launched fourth version of its Web store includes a “Product Wizard” that promises to search for an item. When no product meets the shopper’s criteria, the wizard--instead of suggesting a related or comparable product--always recommends a gift certificate.
While other online retailers promise next-day shipping, Bloomingdale’s Web site tells customers they have to order by Thursday to have gifts arrive by Christmas using standard delivery.
Not exactly what shoppers have come to expect from high-end, full-service department stores in the digital age.
This holiday season is supposed to be the breakthrough year for online shopping, with Internet merchants expected to rake in more than $3 billion in sales.
The prospect of a Merry E-Christmas has captured the attention of both the retail world and Wall Street. On Monday, shares of gadget retailer Sharper Image tripled on news that sales from its Web site rose by more than 400% in November.
But department stores--which sell shopping experiences as much as products themselves--have struggled to translate their premium service to the Web world.
The merchandise that premium department stores offer, such as high-end fashions and prestige cosmetics, poses unique challenges that both hinder their move to the Web and protect them from upstart online competitors.
Department stores are facing a surging online retail environment populated by nimble catalog apparel operations, aggressive discounters and even their own suppliers.
As a result, several national chains, including Neiman Marcus, Robinsons-May and Saks Fifth Avenue, don’t sell online at all.
Some believe that department stores, whose main attraction has been providing everything under one roof, lose their luster on the Internet, which boasts unlimited shelf space from tens of thousands of vendors at the click of a mouse.
“Department stores are trying to balance breadth with depth,” said Nicole Vanderbilt, an electronic commerce analyst with Jupiter Communications in New York. “Many of them would be wiser to concentrate on a few key categories that are most conducive to the online market and develop branded departments around those areas.”
Sears, Roebuck & Co., for example, has built an online store around its Craftsman line of tools.
“People are not shopping online yet the same way they do offline, where they wander around for hours looking at anything,” Vanderbilt said. “The department stores need to be focused.”
At the high-fashion end, however, analysts said it’s unlikely that online ventures will unseat the department stores when it comes to selling that important interview suit or special dress. With fit and styling so difficult to convey on the Web, department stores will be sheltered from an online onslaught.
Unique aspects of the highbrow apparel industry make it difficult for start-ups that want to become the Amazon.com of fashion.
High-end, in-season fashion has a “technologically backward, Byzantine distribution network” made up of thousands of vendors that relies on intricate marketing tie-ins and relationships negotiated over years, said Ken Seiff, chief executive of Bluefly Inc. The New York-based company is an online off-price fashion retailer of designer merchandise, similar to Loehmann’s in the brick-and-mortar world.
In contrast, an online bookseller merely has to establish a relationship with Ingram Book Group, Baker & Taylor Inc. and a handful of other wholesalers to have instant access to an inventory of hundreds of thousands of titles.
Similarly, in the off-price fashion world in which Bluefly operates--where many items are out of season and no longer carried by department stores--it’s easy to find wholesalers and resellers with vast inventories from numerous labels.
Selling high-end apparel also has faced technological limitations that have not hindered other categories. Texture, color and fit, for example, are more difficult to represent online.
The cost of presenting high-end fashion online can be onerous compared with other products, especially when those costs cannot be shared by a catalog operation.
“I have to weigh the cost of putting content on the site with its longevity, because the managing of the complexity of the site is not easy,” said Kent Anderson, president of Macys.com. “The scalability of this is an issue that I’ll face and continue to work on through 1999.”
Catalog apparel companies have had an easier time going online because they already had fulfillment operations in place.
The picking, packing and shipping expertise has not come easy to department stores, which are used to customers coming to them, buying merchandise and taking it home. A multiple-item order to Macys.com, for example, might be delivered in several packages depending on what was available in the warehouse at the time.
“Retailers are used to the fulfillment channels that they have expertise in, which is the understanding of how to properly stock a store,” Anderson said.
Macys.com, which debuted two years ago, is an online pioneer among the department store chains. Anderson said the site has seen a substantial increase over 1997, but declined to provide figures.
Because of their high-end status, department stores are attempting to buck the biggest trend in online retailing: When a product is sold on the Web, its price falls dramatically. It is a phenomenon that shoppers have come to expect.
Online browsers say that price, not security, is the single most important change to online shopping that would spur them to actually make a purchase, a recent Jupiter Communications study said.
Retailers are responding.
Catalog clothier Lands’ End Inc., for example, aggressively uses its Web site to move excess inventory, updating it at least four times a week with new sales listings and e-mailing customers to notify them of specials.
But most department store executives say that they will not be offering price breaks online, even when their stores hold sales.
“The apparel vendor’s job is to have a lot of volume and sustain some impression of value that’s very emotionally based,” said Dan Nordstrom, co-president of Seattle-based Nordstrom. “They have no interest in having their products priced as low as possible because things that are priced low are psychologically worth less.”
But even in apparel categories that are largely commodities, such as T-shirts and jeans, Nordstrom and others said they will not compete solely on price online. Instead, they will rely on the power of their brand for superior customer service.
When it comes to apparel, “I’m convinced that you’re not going to go out and price across the Internet to find the best price, because in the end it’s not really worth it,” Nordstrom said. “You’ve figured out that it doesn’t cost that much more at Nordstrom because they’re all about the same. There may well be, if I spent 15 minutes, the opportunity to save $2, but it’s just not worth it to me.”
And while retailers in other categories brag about the comprehensive nature of their offerings, department store operators say their role is to be an editor and arbitrator of fashion, not just to offer everything available.
Certainly, department stores have offline assets other than the vendor relationships that can carry weight in the digital world.
Customers value having stores to which they can return merchandise. Department stores have spent decades understanding how people shop. As a result, they have won the trust of shoppers, who recognize their brands as marks of quality and fashion.
The department store’s traditional strength of offering a wide variety of articles under one roof is being challenged online, where many of their vendors have recently opened Web-based stores. Levi Strauss & Co. and Estee Lauder Cos. are just a click, instead of a drive, away.
Unlike the small selling space that these vendors have in department stores, they can have a large presence online. Like the department stores, these vendors also are trying to preserve their price structures and image, and are unlikely to allow other online operators to undercut prices.
“We have very image-oriented products, and we never want our products to be viewed in less than an aspirational light,” said Angela Kapp, vice president of special markets and new media for Estee Lauder. “When you’re in that kind of business, you also have selective distribution, and that’s what we have.”
Estee Lauder, which has 12 brands, wants to make sure that its image is projected consistently among online retailers, in the presentation and pricing of its products on the Web-based stores.
“Most of our retail partners are learning slowly, and that’s one of the reasons we went direct on our site,” Kapp said. “Over time, the traditional image-oriented brands, the brands that require touch and feel, the lifestyle kind of brands will be successful. But they will have a different model than Amazon.com.
“How do you sell a fragrance online? Scratch and sniff monitors?” Kapp said. “But here’s the reality: Fragrance is not about smell. It’s about image.”
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Top Shopping Web Sites
Some of the most popular shopping sites, measured by the percentage of home Internet users who visited the sites in August 1998:
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Percentage Site who visited https://www.amazon.com 8.0% https://www.cnet.com 4.4 https://www.ebay.com 4.4 https://www.columbiahouse.com 4.0 https://www.barnesandnoble.com 3.8 https://www.valupage.com 2.9 https://www.zdnet.com 2.6 https://www.classifieds2000.com 2.6 https://www.musicblvd.com 2.6
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Source: Media Metrix
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