Online Clothing: No. 1 Retail Category

Sales of clothing have surpassed sales of computer hardware and software for the first time in the ten years of online retailing, according to a new report by Forrester Research for Shop.org. Online sales are forecast to increase 18% this year to $259 billion.

In 2006, clothing and accessories, including shoes, totaled $18.3 billion against $17.2 billion for hardware and software, long the frontrunner for non-travel online sales. The category moved into second place in 2006 at $17.2 billion, followed by sales of autos and auto parts ($16.7 billion) and home furnishings ($10 billion).

I can tell you from deeply painful personal experience, that this was not the case 7-8 years back when we did Uuma. This year, however, experts expect 10% of all US clothing sales to happen online.

Unlike other segments, the category is dominated by old brick-n-mortar retailers who have reinvented themselves: J.C. Penny, Nordstrom, Gap, Land’s End, Nike, etc. A notable exception is shoe retailer Zappos, which shows promise in becoming an independent retail brand.

Against that backdrop, I looked at Gap, Inc. (GPS) and its recent woes. Revenues declined from 2006 fiscal year to 2007. Nordstrom (JWN), on the other hand, is a great growth story, with a stock that has appreciated hugely from mid 2003 to now. What % of this growth is due to their growing skills in online sales? Ralph Lauren (RL) also continues to grow. What is their online strategy, though?

We have a generation of shoppers developing in America that are online junkies. As they advance in their years, and their wallets grow in size, it is essential for big retailers to develop sophisticated online strategies.

I gave an example from the fashion world to illustrate my vision of Personalization in my definition of web 3.0. It uses technology to develop highly personalized understanding of users and their needs and preferences, and turning that knowledge into merchandising excellence.

Failing to incorporate Personalized Merchandising and precise analytics capability is going to become a fatal disaster.