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Sep 9, 2013
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Traditional US stores fight Amazon for online sales

Sep 9, 2013

U.S. bricks and mortar retailers are racing to catch up with e-commerce giant Amazon.com in fast-growing online sales.

Retailers ranging from department store Macy's Inc to discounters like Wal-Mart Stores Inc are linking online and in-store inventory systems, speeding shipping and promoting exclusive products to counter Amazon, which dominates U.S. online sales.

Reuters will take a closer look at e-commerce and other industry trends at its global Retail and Consumer Summit, which begins Monday.

"There's no question that the vast majority of retailers need to focus on the digital channel," said Forrester Research analyst Sucharita Mulpuru.

The "ability to buy online and pick up (inventory) in stores is important for maintaining sales," she added.

Though online sales account for a tiny part of overall U.S. retail sales, the category is growing far faster than traditional retail.

Forrester Research expects online sales to climb 10 percent for 2013. According to an Ipsos poll conducted for Reuters in August, nearly as many shoppers plan to shop primarily online (15 percent) this holiday as in physical stores (19 percent).

Some mainstream retailers have seen online sales growth soften the blow of persistent retail malaise. Online sales helped chains like Nordstrom offset weak department store results last quarter.

U.S. retail e-commerce sales for the second quarter of 2013 were an estimated $60.2 billion, or just 5.8 percent of total sales in that period, according to the U.S. Department of Commerce.

E-commerce sales jumped 18.4 percent from the second quarter of 2012. Total retail sales increased 4.5 percent, the commerce department said.

"Amazon is forcing people's hands," said Joel Bines, managing director of consulting firm AlixPartners.

So are the legions of U.S. mobile phone users who want to shop online from their living room couch or while out and about.

"Nowadays, who's not" an online shopper? asked Wharton Business School professor Barbara Kahn.

Experts said companies such as Victoria's Secret parent Limited Brands Inc, Saks, Macy's and Nordstrom Inc are leading the move to "omnichannel" retailing, which covers everything from actual stores to personal computers and mobile phones.

Over the coming decade, bricks-and-mortar retailers will invest in projects that seamlessly merge online and offline inventories, ITG Investment Research analyst John Tomlinson said.

"The devil is in the details," said Tomlinson.

Not only do traditional retailers have to get inventory management right, he said, they also have to offer products not found on Amazon at competitive pricing and then deliver them quickly.

Companies rooted in catalog sales, such as Limited Brands, lead the pack when it comes to such efforts. They ultimately aim to have up-to-date information on every available product, whether it is in a massive distribution center or a single store.

Shipping is at the core of traditional retailers' efforts.

This holiday season, around 500 of Macy's 810 stores will help fill online orders, up from almost 300 last year.

Saks Inc is also ramping up its "ship-from-store" capability and will launch a site for its Off Fifth chain.

Wal-Mart, which said earlier this year it was on track to surpass $9 billion in annual online sales, is also using some stores to process online orders and speed up delivery. It has been testing the use of in-store lockers to hold goods ordered on the Internet.

Amazon, which has no stores, has installed lockers in grocery, convenience and drug stores for several years.

Electronics retailer Best Buy Co Inc said its "buy online, pick up in store" program helps the chain sell more product service plans, while also boosting online sales and inventory management, Chief Executive Hubert Joly said.

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