Retailers stress bricks over clicks

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The nation's leading retailers, concerned about the all-important holiday selling season, are concentrating marketing dollars on bricks, not clicks.

"Retailers generally know how difficult the season is going to be," said Walter Loeb, president of Loeb Associates, a consultancy that publishes the newsletter the Loeb Retail Letter. "Retailers are looking to pull customers into the store. It's going to be very promotional, and there will be less business for the Internet"--or at least lower growth.

Mr. Loeb in recent months has lowered his estimates of Internet sales from the exponential hikes of previous years. Sales in 1997 were $6 billion, he said, more than doubling to $13 billion the next year, and almost doubling last year to $23 billion.

While Mr. Loeb anticipates Internet sales will rise 30% to hit $30 billion this year, that's down from his original projection of a nearly 36% increase. For 2001, he anticipates online sales will increase 33% to $40 billion.


Taking the online pressure off traditional retailers is Wall Street's new attitude about dot-coms. The financial community is demanding start-ups produce a profit and cut marketing.

A September Goldman Sachs consumer e-commerce research report noted: "We believe this holiday season will likely not be one of 'hype' or exuberant spending to drive [sales] at any cost, as was the case last year, but will be about execution, displaying progress toward achieving scale, and profitably meeting the needs of customers."

Not all pure plays--independent dot-coms--are taking an advertising hiatus, however. has developed a fall campaign from agency FCB Worldwide, San Francisco, as has eToys from Publicis & Hal Riney, also San Francisco. Last year Amazon spent $36.9 million on offline ads and eToys spent $35.8 million, according to Competitive Media Reporting., meanwhile, has hired D'Arcy Masius Benton & Bowles, Los Angeles, for an ad campaign for its site, for an anticipated $25 million ad effort. will try to breathe new life into its online operation through an alignment with Amazon will promote Toys "R" Us and handle the toy seller's online distribution.

Wall Street's current attitude is good news for traditional retailers. With a more level playing field, traditional stores are crawling onto the Web with measured steps.

Wal-Mart Stores was said to be preparing to unveil its third site reincarnation, although it's uncertain if it will be fully operational in time for Santa Claus this year. After Wal-Mart missed the 1999 holiday online deadline for a revamped site, it moved operations to California in partnership with venture capitalist Accel Partners. In March appointed Banana Republic CEO Jeanne Jackson, its CEO.

"Their plan is to have it much more functional for the holiday," said Burt Flickinger III, managing director of consultancy Reach Marketing. For every $1 it spends on its site, Wal-Mart believes it will generate $6 to $7 in retail sales, he said.


Mr. Flickinger said Wal-Mart plans to make inroads this holiday into online book, CD, computer software and gift sales. In particular, Wal-Mart wants to establish leadership in the videogame category, he said. "Ultimately, their goal is not only to be the largest store on land, but one of the top online."

Wal-Mart's Sam's Club already offers a Click & Pull service for customers with orders larger than $250. Under the system, merchandise ordered online will be ready for a customer within 24 hours at a local Sam's Club.

For the time being, Wal-Mart intends to keep its dot-com advertising at its current agencies that include Bernstein-Rein, Kansas City, Mo., and GSD&M, Austin, Texas, but might switch to its own shop in a year or two, Mr. Flickinger said.

Sapient, one of the Web developers working on the revamped site, however, last month said it was uncertain it would be ready for the holiday. Wal-Mart executives did not return phone calls.

Another store that might not make it time for the holidays is Ann Taylor Inc. The women's apparel retailer planned to open its online store in early November and "if that doesn't work, the spring 2001," said President Patricia DeRosa, speaking at a Banc of America Securities conference last week. "It's like a store opening, we want everything to be right for the brand." The site is costing $10 million to rebuild.


Other major bricks-and-mortar powerhouses ranging from Target Stores and Kmart Corp. to Williams-Sonoma's Pottery Barn also are priming the online pump with expanded offerings.

"This year, people are continuing to figure things out," said Cathy David, general manager of "We are still trying to drive traffic to the store." has expanded its online selection with clothing brands such as Cherokee and Merona and is positioning itself as a gift destination. "A significant portion of Internet sales goes to a second person," Ms. David said. Another goal is to expose consumers who might not live near a store to the Target brand, she said.

Pottery Barn's new Web site ( offers a visual tour of a home decked out for the holidays, a feature that will be updated with the seasons. The site also allows users to check their catalog and Internet orders against a real-time inventory. "We will target the season, but not in a crazy dot-com fashion," said Shelley Nandkeolyar, VP Williams-Sonoma eCommerce division, which oversees Pottery Barn as well as Williams-Sonoma's main site, noting the stores are looking at a multichannel selling strategy.

The multichannel approach is endorsed in a recent study by Jupiter Communications, which found such shoppers spend 30% more than non-online customers.

Other retailers whose sales are not as holiday-sensitive, such as Home Depot and Walgreen Co., are stepping up their Web efforts. Home Depot has begun a Las Vegas test of a site that allows consumers to pick up product at the store within two hours, have next-day delivery by Home Depot or in two days via FedEx Corp.

Dick Hammill, senior VP-marketing and communications at the home-supply retailer, said the company's goal is to "let customers shop the way they want to shop. We want to make sure everything is right before we flip the switch."

Walgreen's, which planned to launch a campaign for its Web site, has put it off for a while, said Greg Sinclair, VP-advertising. The drugstore's site ( is about to enhance its capabilities with a healthcare database from which customers can be warned about conflicting prescriptions when they reorder medication.

"Two years ago, [retailers were told] the pure-play guys were going to put you out of business," said Mr. Sinclair. Now, he said, "Brick-and-mortar (stores) are definitely in the driver's seat."

Copyright September 2000, Crain Communications Inc.

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