WASHINGTON – Las Vegas shoe merchant Zappos.com more than doubled its sales last year to $184 million, upgrading all customers to expedited shipping from the Kentucky warehouse where it stashes 1.7 million pairs of shoes.
“We specialize in service,” said founder and chairman Nick Swinmurn.
As Web shopping turns 10 this year, it has grown bigger and more popular than most analysts ever predicted. Excluding travel, online sales in the United States grew 24 percent last year, to about $90 billion, accounting for nearly 5 percent of all retail sales, according to the National Retail Federation.
Internet commerce is a fast-changing industry that regularly redefines itself, especially as the large brick-and-mortar chains are marching more aggressively online, doing cross-promotions between their Web sites and stores.
Analysts say some of the biggest retail chains have yet to hit their stride online. When they do, it’s anyone’s guess how that might affect the army of small specialty retailers such as Batteries.com and BBQGuys.com that use the Internet to offer huge selections to a growing national audience.
“There is an argument going on about whether smaller merchants will continue to proliferate and grow disproportionately or whether you will see big-name, off-line retailers like Wal-Mart, Best Buy and Home Depot compete more effectively online and take over this medium,” said Graham Mudd, spokesman for Web analytics firm ComScore Networks.
The heavyweight of Internet retailing is still Amazon.com, a virtual department store that started as an online bookstore in 1995 and today sells stuff in more than 30 categories, including loose diamonds, which it added in May. Amazon catapulted to the top not only by simplifying online shopping but also by recruiting thousands of small merchants to sell on its site and running other sites on behalf of such big merchants as Target Corp. and Borders Group Inc.
Amazon racked up total Internet revenue of nearly $7 billion last year – more than twice the $3.2 million that No. 2 player Dell Inc. sold online in 2004, according to Internet Retailer magazine.
The magazine’s list of the top 400 Internet retailers shows that sales are distributed fairly widely. And while big players still outsell peewees, a fat chunk of the sales comes through niche sites.
A total of 75 retailers had online sales exceeding $100 million, and 208 sold more than $20 million. All 400 companies on the list had sales of more than $3 million. Shop.org projects online sales will grow by more than 20 percent this year, but there are wild cards that could slow it down.
One is credit card fraud, which runs much higher for Web retailers than for brick-and-mortar stores.
The type of goods sold varies widely. After travel, the computers and electronics category is the biggest for online sales. While apparel sales are much smaller, they are growing faster, as are sales of jewelry and home decor items.
Cars have become huge sellers online, surprising those who thought Web shoppers would insist on personal inspections. Last year, cars accounted for about one-third of the total $34 billion in merchandise sold through eBay’s online marketplace.
Success online is hardly automatic. It still requires a knowledge of the customer and the competition.
Sinmurn, of Zappos, said the company realized its key competition was off-line shoe stores, pushing it to provide fast, free shipping.
It also decided to give customers 365 days to return shoes, no questions asked.
“Now the main driver of our sales is word of mouth,” Sinmurn said. “And on any given day, over 60 percent of our customers are repeat customers.”