To Go Shopping these days, More Americans are Trading in their car Keys for a Keyboard.

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June 2009

Online shopping is gaining at a time when simply filling up a gas tank to head to the mall can seem like a spending spree.

A number of retailers - including Gap, Victoria's Secret and JC Penney - are experiencing double digit sales growth at their shopping Web sites, creating a surprising bright spot during an otherwise gloomy time for sales in brick-and-mortar stores.

One popular strategy for getting shoppers' attention is offering free delivery.

The Web sites of Neiman Marcus, Saks, Nordstrom, Bloomingdales, Macys, BonTon Stores, Aeropostale, American Eagle Outfitters, Target and Kmart were all offering a deal on shipping.

"We know that mall traffic is down more than off-mall traffic," said Mike Boylson, chief marketing officer for J. C. Penney, which had an 8.7 percent increase in Internet sales in the first quarter of this year.

That is in contrast to a 7.4 percent decrease in sales at stores open at least a year, known as same-store sales and a measure of retail health. "We see more people turning to online because it’s much more efficient in terms of time and money," Mr. Boylson said.

Retailers are walking a fine line in encouraging online sales.

Of course, they are happy to attract more shoppers to their Web sites, but not at the expense of in-store sales - an important measure for investors.

Then again, the Web can drive instore business, whether shoppers go into a store to return an online purchase or whether they buy an out-of-stock item through a computer at the store.

Lately Nichelle Hines, an actress in Los Angeles, has been shopping online for everything but gas itself - pet supplies, books, DVDs, water filters, kitchen appliances, a dress, her favorite health drink and materials to build a voiceover booth so she does not have to drive to a recording studio.

"It has saved us," said Ms. Hines, who lives with her boyfriend, Charles, the builder of the booth. “And we really just started doing this three or four months ago just from sheer desperation of spending money on gallons of gas.”

Victoria’s Secret, too, has had an online sales increase. Its catalog and Internet sales were up 11 percent in the first quarter of this year while same-store sales declined 8 percent, according to Maggie Taylor, vice president, senior credit officer at Moody’s Investors Service.

Gap had an 11 percent decline in same-store sales in the first quarter, but a 21 percent increase in online sales.

About six weeks ago, just in time for the back-to-school shopping season, Gap reinvented its e-commerce operations, enabling consumers to shop the Web sites of all of its brands — Gap, Old Navy and Banana Republic as well as its newest, Piperlime, an online shoe store — with a single virtual shopping cart and a flat $7 shipping fee.

"Parents don’t want to drive to four different stores, two different malls," said Kris Marubio, a spokeswoman for Gap Inc. The new Web design "helps time-pressed parents achieve their back-to-school shopping goals in less time and at less cost," she added

The number of shoppers visiting Web sites that offer discounts has jumped, too.

Online retail sales, often made all the more alluring by the lack of sales tax, have grown right from the start, but still represent a small percentage of total retail sales. And while e-commerce growth has slowed in the current economic downturn, analysts do not expect it to cease.

In fact, online sales represent one of the only positives for many retailers.
"E-commerce, when you compare it to store retail is a bright spot because whereas store growth is in the middle low single digits e-commerce is still growing at least in the mid to highteens" said Jeffrey Grau, retail e-commerce senior analyst with eMarketer.

Internet sales are expected to surpass $200 billion this year, up from $175 billion in 2007, according to Forrester Research. Given that growth, Moody’s, the credit rating agency, said last month that it would begin giving retailers’ Internet sales and strategies more weight when analyzing the companies.

And retailers like J. C. Penney and Target have begun including online sales in their same-store sales figures.
“Online is starting to matter, and it is performing well,” said Ms. Taylor of Moody’s.

“Now that it is big enough to matter, companies want to call it out.”
To encourage the trend, retailers are investing in online operations and experimenting with new marketing techniques. Even retailers that are scaling back in their physical stores are expanding or enhancing online operations, which are by and large the fastest growing parts of their company.

The shopping Web sites themselves are becoming speedier, easier to navigate and filled with more products.

Investing in online operations is less risky than investing in real world stores because Web sites do not require the same level of personnel or resources.

EBags.com, a purveyor of items like dainty clutches and backpacks, sent more than a million members an e-mail message late last month with an illustration of gas pumps set at various migraine-inducing prices. Then there was a pump that said “eBags.” It was set at $0.

“Paying too much to get from here to there?” the accompanying text read. “Skip the mall. We’ll ship it to you for free.”

Then again, these days some consumers do not mind paying for shipping

"A lot of shipping costs are $3 and $5," said Jessica Delmar, 23, a manager for a technology company in San Francisco who says she rarely sees the inside of stores anymore.

David Caruso 1800 853 390