OnLineRetail Page Bottom  References from Other Sources

On-Line Retail

July 22, 2002, New York Times

Some Online Retail Surprises


THE Internet research firm comScore Networks plans to release its list of the 25 highest-selling Web retailers for May today, and the usual suspects figure prominently. ranks first, with almost double the sales of Ticketmaster and Amazon, which rank second and third. Office Depot, Sears and Victoria's Secret also rank high.

More surprising, perhaps, are some of the less publicized e-tailers that rank relatively high on the list — like Staples's and Alticor's, which are fifth and sixth, and Spiegel's, which ranks behind only Victoria's Secret among online apparel sellers.

That each of these companies has crept into e-commerce's upper echelon is a testament to the distinct approaches they have taken to selling online.

Along the lines of Amway, Alticor's offline division, Quixtar, relies on a network of more than 250,000 distributors — "independent business owners," in Quixtar vernacular — who pay the company $37 a year for the right to recruit consumers to shop at Quixtar, and other distributors to join them in marketing the site to consumers.

Anyone can shop at, which sells private-label health and beauty products as well as goods from retail partners like

But those who pay $20 get member discounts of about 30 percent. Their purchases are then credited to the distributor who recruited them. Distributors earn commissions of between 3 and 25 percent on any purchases made by their recruits. If the distributor brings fellow distributors into the Quixtar fold, the person at the top of the food chain earns bonuses for sales his affiliates generate.

That formula has led to swift growth, said Ken McDonald, who, as the managing director of Quixtar, helped create the site in late 1999. The company generated $448 million in revenue its first fiscal year and $751 million in the second, Mr. McDonald said, and when results for the third year are announced later this summer, "it'll be a whole bunch more than that."

Mr. McDonald would not say how much the typical distributor earns in commissions, but he said that about 32 percent of the company's revenue was returned to them in Quixtar's first two fiscal years. In a way, those commissions represent the company's marketing budget, he said. "We've put our money into their pockets rather than banner ads or other advertising — things that have cost a whole lot of money for other companies," Mr. McDonald said.

Quixtar would not disclose the rate at which it converts visitors into buyers. But comScore data suggests the site's conversion rate is higher than for sites like, Amazon and, to name three others in comScore's top 20.

Mr. McDonald attributes the site's success in part to an unusual feature called Ditto Delivery, which is an e-commerce auto pilot of sorts. Customers are automatically sent items, like vitamins or shampoo, on a periodic basis, depending on what they specify. The system, which Quixtar has promoted heavily in the last year, now accounts for more than 20 percent of the company's sales, he said.

Just above Quixtar in the rankings is, which uses a similar approach to appeal to online shoppers who do not want to waste much time shopping. The office products supplier, which Staples bought in 1998 for $685 million, allows shoppers to create a list of favorite items and past purchases, and check off items quickly each time they buy.

Half of the site's shoppers use that feature, called Catalog Quick Order, according to Sarah Alter, vice president of But Ms. Alter said that no matter how many used the feature, "80 to 90 percent are sitting there with a catalog in front of them while they're on the site."

Indeed, Quill's roots are firmly in the catalog industry, with 68 percent of company sales coming from its mail-order business. Quill, which has no stores, does not release sales figures. Nor does comScore release sales figures for companies on its list.

Ms. Alter said Quill considered itself primarily a business-to-business company, mailing 1,000-page catalogs to more than a million small businesses twice a year, and sending out more than 600,000 e-mails weekly to many of the same customers.

As to how Quill achieved its top five standing with comScore — whose rankings are intended to reflect spending by consumers, not office workers — Ms. Alter said many of the company's customers might buy on the site during the day for business, then go home and buy goods for household use.

No matter where they log on, Quill's customers generally know what they want before they type in the Web address, Ms. Alter said. The company's conversion rates "are in the mid-30 percent range, and sometimes the high 40's," she said. Last year, the company was cited by Forrester Research and comScore as having the highest conversion rates on the Web.

Quill also takes an approach to marketing that few other catalog companies do, whether their target customers are businesses or consumers. Earlier this year, Quill began calling thousands of catalog customers each week, offering to coach them on how to navigate the site, Ms. Alter said.

"It's very much a hand-holding approach, because we know we got the early adopters in the past two years, and now we're targeting customers who are really just starting to explore the Internet at home and at work," she said.

Aside from the fact that it is cheaper to handle a customer order via the Web than by phone, Ms. Alter said there were other reasons for encouraging online orders. Namely, the average amount spent by a Quill customer over their lifetime is significantly higher if the buyer uses both the Web and the catalog.

The same goes for the online apparel merchant, Geralynn Madonna, the president of Newport News, said, "The lifetime value of our online and catalog shoppers is by far superior to a catalog-only shopper, and a catalog shopper is superior to an Internet-only shopper."

That is one of the chief reasons why catalog retailers, which a few years ago experimented with cutting their catalog mailings as they moved more customers to the Web, have mostly shelved such experiments.

Neither Ms. Madonna nor George Ittner, the chief executive, would disclose the company's revenues, but they said that more than 20 percent of sales came from the Web.

When asked how the company's online sales have surged ahead of other higher profile apparel e-tailers, like Land's End, J. Crew and Eddie Bauer, Ms. Madonna suggested it was partly because the company takes a different approach to presenting its merchandise.

Rather than classifying merchandise entirely by category, Newport News relies heavily on presenting goods within the context of fashion themes and trends. For instance, following one of the trends dictated by the fashion cognoscenti, the site features a Shades of Summer display that includes a wide variety of clothes that have nothing in common but the brightness of their colors.

That approach, Mr. Ittner said, appeals more to impulse shoppers. "And the fashion business is an impulse business," he said. "People don't just wake up and say, 'I need a red short-sleeve dress.' "

Presenting the merchandise in a broader fashion context helps shoppers avoid the drudgery of sifting through dozens of thumbnail photos of sweaters, for instance — an all-too-common set up for apparel retailers.

"That," Mr. Ittner said, "just makes me crazy."

Copyright 2002 The New York Times CompanyPermissionsPrivacy Policy

horizontal line
to home page e-mail Page Top