With the economic expansion showing few signs of slowing, apparel and home furnishings chains like Restoration Hardware, Williams-Sonoma and Old Navy are still focusing on building more physical stores and have not yet begun to sell online. Some, like Restoration Hardware, have expanded into catalog sales, a lucrative area that accounts for about 20 percent of total annual retail sales.
There are exceptions. Home furnishings chain Crate and Barrel, which operates 80 stores nationwide, today opened its online doors with 500 products and plans to add furniture to the selection in the future. And the Gap has been selling its full line of clothing on the Internet for several years.
For many major retailers, the online numbers are still too small to justify the resources an e-commerce site requires. "The Gap made more in net income in 1998 than Amazon generated in revenues," said retail analyst Marcia Aaron of BT Alex. Brown. But other retailers are late to recognize how profoundly the Internet is changing the business, analysts say.
The direct distributor-to-consumer relationship on the Net is the most important business trend since the creation of the assembly line, according to marketing consultant Harry Dent, who spoke at the Building Brand Value conference in San Francisco this week.
"The industries that organize around the consumer will get the brand loyalty in the next century," Dent said.
Despite such advice, and despite the runaway success of e-commerce companies like eBay and Amazon.com, many retailers aren't sure that taking their brands online will translate into better sales. Restoration Hardware, a home furnishings chain, uses classical architectural lines, hardwood floors, and plush leather furniture in its stores to appeal to an upscale demographic, but it's difficult to recreate that appeal on a Web site.
"It's critical for us to figure out how to transfer the experience of our particular venture" to the Internet, said Restoration Hardware chief operating officer Tom Christopher. The Corte Madera, California-based company's Web site lists some items, but to order them, shoppers must call a toll-free number or visit a store. On the other hand, the company's mail-order business is booming--the company sent out 4 million catalogs this spring.
With its online shopping site, Crate and Barrel has tried to recreate its mail-order catalog, but with added features such as maps and driving directions to nearby stores. The company has also been mindful of how the online shopping experience differs from both the stores and mail order, according to spokeswoman Betty Conn.
"Everything has been photographed explicitly for this Web site for uniformity so the message won't get muddled," she said. Although Crate and Barrel "has no idea what the response will be," Conn added, prior to its launch the company received 35,000 emails from consumers who wanted to be notified of the online opening.
Another retailer that has taken to the Web with enthusiasm is the Gap, which even provides in-store PCs for browsing its Web site. It recently transferred its top marketing executive to its online effort. But its parent company, Gap Incorporated, has not taken the same approach with its two other chains, Banana Republic and Old Navy. Neither has a Web site, let alone an online store.
"We're focusing on our [brick-and-mortar] stores, serving our customers through convenient locations," said Old Navy spokesman Joe Enos. The company has no immediate plans to sell either online or through catalogs, he added. But analyst Aaron expects both Old Navy and Banana Republic to roll out e-commerce sites soon, once Gap Incorporated is sure that it can handle fulfillment.
"The key is to make sure they don't disappoint the customer," Aaron said.
Gap Incorporated president Robert Fisher says while the Internet is an opportunity to extend its brick-and-mortar brands, a main concern for the company is unifying the offline and online message.
"We will not take Gap Online separate as a public business," Fisher said. "We would destroy the only real advantage we have against the pure virtual retailers."
The advantage over Internet-only retailers lies in offering customers a physical store where they can try on clothing and return merchandise bought through the mail.
"People do not like shipping things back," said Harold Ruttenberg, chief executive of Just For Feet, a Birmingham, Alabama-based retailer of athletic wear.
Still, on Wall Street these days, the Internet-only retailers have the advantage, at least for now. Excited by the potential for future sales, it is incumbent on the traditional retailers to make sure their brand transfers successfully to the Internet and isn't beaten by a more nimble, less fearful start-up like Amazon.
"Venture capitalists are over-funding [Internet] companies with the idea that they can build brand in a short period of time," said venture capitalist Michael Lazarus of Weston Presidio Capital.