Report from Internet Retailer 2008

I am at the Internet Retailer conference in Chicago this week. You do not hear much about this conference in the blog world for some reason. That is strange considering that there are 5,000 attendees and practically every major company in internet retail is represented here.

There is always a lot to learn from this conference, though you have to look for the nuggets. The keynote and major presentations are from leaders of major retailers. In my opinion, the chance of a retailer standing up in front of 5,000 competitors and giving away too much information is pretty slim. But at least, you can get a feel for where the industry is heading.

The keynote address this morning was by Mike Boylson, Executive VP and Chief Marketing Officer at J. C. Penney. He spent most of the time telling us how great J. C. Penney is and showing commercials of their new brands. Their main site, jcp.com, did $1.5 billion in sales last year, making it the 15th largest online retailer.

According to him, jcp.com is the top priority of J. C. Penney. If you believe that (I only half believe it), that is quite a statement considering their huge investment in infrastructure for their mail order and retail stores.

Here is an interesting takeaway that would make me uncomfortable if I was an apparel retailer. He stated that a huge percentage of their sales online come from obscure SKUs that they would not sell in their stores—extended sizes, etc. In other words, their product selection is far greater online than offline.

Here is the significance of that statement to me. Up until now, online retailers have been encouraged to niche to avoid competition with the big boys in retail. The problem is that the big boys are now figuring out that they can carry far more SKUs online than offline. That takes away much of the niche advantage from the small player.

This is why what Amazon is doing is so powerful (and scary). While Wal-mart might carry tens of thousands of SKUs, Amazon can carry tens of millions of SKUs if they want to. If they want to carry 100 different brands of baby pacifiers, what is to stop them? Tough luck for the baby pacifier niche sites…

Here is one more thing that will make apparel niche sites sweat a bit. Boylson also mentioned that J. C. Penney has a budget for $1.4 billion to spend on marketing initiatives and hinted that most of that money would go to jcp.com. Ouch!