Will These Retailers Have Higher Online Sales This Holiday Season?

Competition is the name of the game during the all-important holiday shopping season, as retailers are poised to offer greater discounts and promotions to attract customers who are still uncertain about the economy.

Recent earnings reports showed that low-end, mid-market, and high-end retailers such as Wal-Mart  (NYSE: WMT  ) , Kohl's (NYSE: KSS  ) , and Nordstrom (NYSE: JWN  )  reported soft quarterly results. On the other hand, Macy's reported strong sales in the third quarter, though profit margins decreased 0.4% from last year.

 Macy's expressed confidence going into the holiday season and is prepared to boost sales even if its profit margin takes a hit. As consumers continue to be very mindful of prices, online shopping, where price comparisons are easiest, becomes more attractive. I'll take a look at how retail e-commerce is preparing for increasing consumer interest in online shopping.

Will frugal holiday shoppers spend more online?
According to Deloitte's annual holiday shopping survey of 5,000 consumers, holiday purchases are expected to rise by 9% this year over last. Shoppers will be searching for discounts, as 73% of holiday purchases are expected to be influenced by coupons. The web is expected to be a top-shopping destination this holiday season, with 47% of surveyed consumers responding that they expect to shop online, and 38% will complete most of their purchases online.

Compared to last year, U.S. online sales during the holidays are expected to increase between 13% and 15%, according to Shop.org, an arm of the National Retail Federation trade group. Shop.org predicts that November and December sales could reach $82 billion.

Retailers increasing investments in e-commerce
For Wal-Mart, global e-commerce sales grew 40% in the third quarter, while comparable-store sales in the U.S. fell 0.3%. Chief executive officer Mike Duke mentioned during the earnings call that global e-commerce is delivering impressive results.

In a recent meeting with investment analysts, the company discussed recent to Walmart.com. Improvements include a greater assortment of products, a new free-shipping program, and an improved site-search feature that has increased conversion rates. 

According to Neil Ashe, Wal-Mart's e-commerce chief, Walmart.com has the lowest price on the web for 70% of the items it offers, and the company expects to meet/exceed its projected sales number of $10 billion this year. The site is ranked No. 4 in e-commerce sales by Internetretailer.com, a site that monitors and researches e-commerce trends.

A similar story was noted at Kohl's, where second-quarter earnings saw online sales up by 28%, according to Internetretailer.com, while comparable-store sales increased by only 0.9%. The company recently upgraded to a new e-commerce platform that allows Kohl's to expand its e-commerce capabilities.

In addition to the change in platform, the company is taking other measures to make it easier for consumers to shop both online and in its stores. Some 200 of the company's 1,155 stores are now fulfilling online orders, and in-store pickup of online orders will be introduced next year.

High-end retailer Nordstrom is also seeing its online channels beating sales at its physical stores. The company earned $1.3 billion in e-commerce revenue in 2012 and it has set a goal of reaching $6 billion in online sales by 2020. Nordstrom's web business accounts for 25% of total revenue, along with Nordstrom Rack discount stores.

In the next few years, CEO Blake Nordstrom believes revenue will be split 50-50 between the company's physical stores and its online channels. Like Kohl's, Nordstrom has also invested in website upgrades by adding enhanced search, navigation, and checkout; the site even includes 360-degree video for some of its products.

My Foolish conclusion
E-commerce continues to provide an increasing number of sales for big chain retailers. Their online sales even outperform the online market as a whole. For the second quarter of 2013, the Commerce Department reported that total e-commerce sales in the U.S. were up 18.4% versus a year ago, a smaller increase than the gains reported by these large retailers.

This holiday season will probably have similar online spending patterns as those seen in prior years. As more consumers favor online shopping, they may end up spending more on holiday purchases than expected.

Is Wal-Mart going to survive the holiday season?
To learn about two retailers with especially good prospects, take a look at The Motley Fool's special free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." In it, you'll see how these two cash kings are able to consistently outperform and how they're planning to ride the waves of retail's changing tide. You can access it by clicking here.


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