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E-commerce is exploding as more consumers choose to shop online -- a trend that's bringing multichannel retailers record earnings. E-commerce accounted for 4.6% of total retail sales during the second quarter of 2011, up from 4.2% of total sales a year earlier. Let's check up on last year's leading retailers by online sales to see which companies are solid investments today.
Amazon.com (Nasdaq: AMZN )
The e-retailer shifted into overdrive last year, bringing in $34.2 billion in sales, a 39.5% increase from $24.5 billion in 2009. In 2010, Amazon's sales accounted for more than 20% of the roughly $165 billion in total online retail sales.
Amazon Prime's shipping options are way ahead of the competition, offering unlimited, free, two-day shipping with no minimum purchase requirements for an annual membership fee of $79. Amazon Prime benefits customers making regular online purchases, and the yearly membership fee will likely keep online shoppers coming back for more free shipping.
Staples (Nasdaq: SPLS )
I was surprised to learn that Staples was second only to Amazon.com in online sales for 2010 -- ringing in a total of $10.2 billion for the year. Staples recently upgraded its online stores to IBM's (NYSE: IBM ) WebSphere e-commerce software, which has improved page download times anywhere from 25% to 55%, according to Ken Moore, VP of information technology for Staples.
The real benefit to IBM's software is its ability to visually display inventories on Staples' e-commerce sites. With WebSphere, the Staples B2B site StaplesLink.com can offer real-time inventory display on 80,000 items to more than 10,000 organizations worldwide. Another advantage is it enables Staples.com to quickly scale its systems to handle large volumes of online shoppers during times like Black Friday, without causing slower page-loading.
Not surprisingly, the office superstore is taking advantage of the boom in online sales by shrinking many of its stores' square footage, and featuring tablets and other high-margin merchandise online.
Apple's (Nasdaq: AAPL ) iTunes Store is the third-largest e-retailer, with annual Web sales reaching more than $5.2 billion last year. In 2008, the iTunes Store outshined Wal-Mart (NYSE: WMT ) to become the leading music retailer. Last year, the success continued for iTunes, as it accounted for 64.5% of total consumer spending of online movie sell-through and Internet video on demand.
Apple's App Store is another source of revenue for the company, with more than 18 billion downloads to date. The tech giant takes a 30% cut of all revenue generated by the applications that it publishes -- a model that has made Apple nearly $1 billion and rising.
Liberty Interactive (Nasdaq: LINTA ) is best-known for its interests in QVC shopping network and Expedia.com. The e-retailing and media giant saw more than $3 billion in online sales, with the Web accounting for 36% of QVC's total U.S. revenue in the fourth quarter of 2010. QVC continues to be a strong point for the company, targeting customers through its live broadcast, website, and mobile applications.
Costco Wholesale (Nasdaq: COST ) came in strong with e-commerce operations totaling $1.7 billion in sales. But Costco.com depends on sales of big-ticket discretionary items like televisions, which could be difficult to push during declines in the economy.
The Web accounted for 2.2% of all net sales for Costco last year, with net sales of $76.3 billion for the year. Since starting its e-commerce business in 1998, the discount retailer has added more than 4,000 new items to its online product offerings.
Online retail sales in the U.S. are expected to grow by 10% a year to $279 billion by 2015, according to Forrester Research. While investors can expect great returns from all of these companies going forward, if I had to invest in just one, I'd go with Amazon.com. Last year, the online retailer had a $24 billion lead over its closest competitor (Staples) in terms of Web sales.
I'd keep an eye on Amazon's stock through the holidays as more customers take advantage of discount shipping options online. Track Amazon or any other company by adding their stocks to your free watchlist. Simply click the links below -- it's free.