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INTERNET INVASION; ONLINE SALES CONTINUE TO SOAR, AND EXECS FROM TOP SITES BELIEVE THERE’S EVEN MORE POTENTIAL FOR GROWTH. BUT AS MORE NEWCOMERS ENTER THE FRAY, COMPETITION IS HEATING UP.

Footwear News April 16, 2007 | Niemi, Wayne Byline: WAYNE NIEMI LOS ANGELES – It’s the industry’s biggest growth story.

In just a few short years, online footwear retailing has gone from a risky experiment to a multibillion-dollar business with massive potential. here piperlime coupon code

“[Sales are] amazingly hot right now. [Footwear is] the one [online] category that has continued to increase numbers,” said Scott Savits, CEO of Shoebuy.com. “That’s for a category that a lot of people didn’t think would translate online.” In 2006, sales of footwear online grew to $2.9 billion, compared with just $954 million in 2002, according to a study of online retailing released by Forrester Research. And by 2010, the study predicts that revenues are projected to reach a whopping $5.2 billion.

That hasn’t gone unnoticed by a number of corporate giants looking for new growth opportunities.

Last year, Gap Inc.-backed Piperlime.com entered the fray, while Amazon.com-owned Endless.com made its debut in January. These sites find an increasingly crowded online marketplace, joining established players like Zappos.com, Shoes.com and Shoebuy.com.

And at least for now, most Internet players believe there is ample room for newcomers in the booming market, primarily because there are so many untapped consumers.

“If you surveyed 100 random people on the street, the vast majority haven’t purchased online,” said Tony Hsieh, CEO of Zappos.com, which is on track to exceed $800 million in sales this year. “So there is a huge market that we still haven’t touched.” Still, finding success online isn’t easy.

Top-notch customer service, the right product mix and a sound operational model are essential, execs said.

“Just because there are a few of us doing millions of dollars in footwear sales doesn’t mean that just anybody can open up a site and do well,” Savits said.

A More Crowded Market Execs from established online sites acknowledged that there is more competition than ever before, but they aren’t convinced that all newcomers have staying power.

“I believe anybody with fairly deep pockets believes there is profit to be made with online shopping with shoes,” said Gary Weiner, VP of footwear brands for Ebags.com, which operates footwear site 6pm.com. “I think we’ll see a lot of people come in and go away, but it’s going to be a lot more crowded.” Savits said his site has increased sales 5 percent to 10 percent month over month for seven years running. That kind of bottom-line performance was an invitation for many companies looking to spur sales growth.

“When people see that, you get a whole lot of people saying, ‘If they can do it, I can, too,'” Savits said.

While Zappos.com’s Hsieh said he rarely studies the competition, he did acknowledge the increasingly congested online retail market. “There are definitely a lot of players selling online,” he said. “We don’t see that slowing down anytime soon.” Indeed, Piperlime.com SVP and GM Catherine Beaudoin said Gap liked the growth potential for online footwear sales, which is outpacing apparel. “One of the reasons that we were drawn to this opportunity was that the online shoe industry is growing rapidly, and much more rapidly than the footwear industry overall,” she said. “That’s why we felt comfortable that if we offered something that didn’t exist, we would do very well.” To differentiate itself from the online crowd, Piperlime aims to present an edited product assortment with specific trend recommendations from stylists like Rachel Zoe.

Beaudoin didn’t disclose sales figures, but said consumer response have been “very strong” and that Piperlime.com has sold through a wide assortment of styles. Over the next few months, she said, the site will add 35 to 40 new brand names to its product offering.

While the opportunities for online retailers are clear, it’s also getting more expensive to stay competitive.

As sites like Zappos and Endless made free overnight shipping an industry standard, others have been forced to follow suit. “No other [online retailers] are under the pressure to do things like free shipping, but that’s the new standard in [footwear],”said Barbara Thornton, president of Designershoes.com.

Thornton added that site promotion is becoming more costly. “Google has driven up the price [for your name] to appear … when consumers look up a certain key word,” she said. see here piperlime coupon code

Free returns, clearing inventory of dated merchandise, 365-day return policies and free overnight shipping definitely make online retailing more difficult, Weiner said.

“These are all attractive ideas that eat into margins,” he said. “Who knows? It could be the Achilles heel [of selling footwear online], but it’s part of the business today.” Site navigation and keeping up with the latest online technologies also require continual funding. “We invested millions of dollars in site enhancements and usability,” Savits said. “That has very much been key to us. If we get lazy, that’s when the numbers would start to be disappointing.” Untapped Consumers Even with competitive factors at play, Internet footwear retailers have numbers working on their side.

“I don’t believe that 20 percent or even 10 percent [of consumers] are buying shoes online right now,” said eBags’ Weiner.

Hsieh said that his future customers would likely come from rural areas. “We have customers who say their nearest shoe store is an hour away, and when they get there, it’s a small selection,” he said. “I think a lot more of those people will come to us when they realize how easy it is to buy shoes online.” The age of those shoppers could range from 18 to 80, Hsieh said. However, the company won’t reach out to them directly. “Instead of spending money on marketing, we put that money into our customer service and free shipping, things to improve the experience.” Other online retailers are targeting a more specific niche customer.

Thornton said her company’s edge is its ability to offer difficult-to-find sizes. “We see people who couldn’t find shoes anywhere because they couldn’t find their size,” she said. “We have the styles and the sizes that really appeal to our customers.” According to Beaudoin, Piperlime hopes to attract urban, fashion-oriented women, men and kids by increasing the number of labels it carries, and by offering buying advice and fashion tips. “When customers come to us, they aren’t really buying basics,” she said. “They are buying fashion.” For Shoebuy.com, future customers will look very similar to its existing customer base of 25- to 40-year-old professionals. “We’re doing an extremely good job of homing in on that market and we’ll do it even better,” said Savits.

Going forward, Beaudoin believes that the online market will stratify and more closely resemble the offline retail world, and new customers will shop according to their needs and budget. “I see it becoming more stratified and segmented with value players, specialty players and boutiques,” she said.

Bricks Versus Clicks: How the Rise of Online Shopping Is Impacting Traditional Stores Brick-and-mortar footwear retailers had mixed reactions about online sales’ impact on their businesses.

At The Walking Co., CEO Andrew Feshbach said the No. 1 threat to the comfort industry is Internet-only businesses. “It basically eliminates the concept of a specialty store niche,” he said. “Now nobody goes out and buys shoes on the Internet unless they have already become comfortable with the brand, so the only business that they are taking is our reorder business or our repeat customer business, and that is not right.” Craig Blattberg, owner of New York-based Diane B., said he was sure that online sites were impacting sales, but it was difficult to quantify how much. “They cut into everyone’s business,” he said. “Customers order shoes online all the time.” Edna Galo, owner of New York-based Galo Shoes, agreed. “Mothers can easily go online and then return shoes if they don’t like them. They can also come into the store and look or be fitted and then go back home and buy online to try to find better deals.” Zappos.com CEO Tony Hsieh, however, said the idea that shoes are cheaper online is a misconception, and that service, not price, is what drives people to his site. “Most items on our site are not priced lower than brick-and-mortar stores – some might even be more expensive,” he said. “Whether online or brick-and-mortar, anyone who competes on price alone is not going to have loyalty for long if they aren’t always the lowest.” Eric Shoes owner Eric Mudick is confident that the boutique shopping experience will keep customers coming into his store. “I know that our customers like it better when they can see, touch and feel the shoe. They want the personal experience and service.” Mudick is backed up by a survey conducted by the consulting firm Accenture, which found that the majority of consumers use the Internet to research their purchases, but buy at a local store. According to the report, 67 percent of respondents said that they prefer to shop in physical stores, while 69 percent said they use the Internet to research features.

“Instead of replacing brick-and-mortar stores, the Internet is an extension of consumers’ in-store shopping experience, providing a resource to research product and price,” Jeff Smith, global managing director of Accenture’s retail practice, wrote in the report.

W.N.

Caption(s): Zappos.com launched in 1999, while Piperlime.com entered the online market last year.

Niemi, Wayne