ONLINE SELLING PUTS DENT IN STORES, CATALOGS; APPAREL E-TAILING: TRADITIONAL MERCHANTS NEED UNIFIED VENTURES

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Though conventional wisdom holds that apparel retailers have a tougher go on the Internet than marketers of less personal goods such as books and computers, companies like The Gap and Lands' End have proven how good it can be.

LandsEnd.com and Gap.com rank Nos. 1 and 2 among apparel retailers in sales lured by Web sites, according to a survey by the National Retail Federation.

SOLID BRAND HELPS

Clearly, marketers who take advantage of a trusted brand name and customer base have the advantage. "Apparel and fashion are sold best on the Web when there is already a solid brand," says Steve Kernkraut, managing director, Bear Stearns.

Victoria's Secret, for example, had the brand and infrastructure in place when it added a dot-c0m teaser to a Super Bowl ad this year, he says. The plug referred clickers to an upcoming live Webcast of a fashion show parading lingerie.

Retailers face the problem of a shift in sales from stores and catalogs to the Web. A recent Jupiter Communications Channel Shift report notes that 94% of 1998 online sales represented a shift from traditional channels.

"Even by 2002, less than 10% of all apparel marketers' Web sales will be new sales," says Mr. Kernkraut, indicating the degree of sales cannibalism expected. New sales are sales that would not have been made at regular channels.

"Traditional merchants must build unified ventures [Internet and traditional sales channels] that take advantage of their off-line assets. . .or they will suffer lost sales to Internet-only merchants," says Ken Cassar, Jupiter Communications analyst. Indeed, most merchants have largely chosen not to interface their off-line sales channels with the Internet.

Direct sellers such as Lands' End, Eddie Bauer and The Gap have an advantage over broader-based merchandisers like Macy's in building Internet sales because they typically control their own manufacturing, Mr. Cassar says.

FRET ABOUT TURNING OVER ITEMS

Many suppliers of department stores are reticent about turning over their product for online sales. "They worry their name may be damaged by selling online. Also, many are seeking to bypass the retailer and sell online themselves," Mr. Cassar says.

Nordstrom is attempting to soothe supplier fears this fall by making Nordstrom.com "the" shoe destination. It is plugging the site, which will offer 20 million pairs of shoes for Christmas, with a five-week $17 million ad campaign.

If department stores do well on the Net, newspaper advertising could suffer. "Retailers can use TV and Internet advertising more effectively to push online products," Mr. Kernkraut says. "The Internet is much more targeted, and ad spend could shift [from print]."

CATALOGERS HAVE ADVANTAGE

Because their fulfillment capabilities are in place, catalogers have an advantage over department stores, something not lost on Federated Department Stores, which bought direct-marketer Fingerhut to gain instant fulfillment expertise.

Technology is poised to help fashion retailing overcome its biggest Web obstacle: how to fairly represent their product. There is software being built to allow Web users to zoom into a product, and that will enable the buyer to

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