Federated investing in e-commerce ventures
By Carole Sloan -- Furniture Today, February 27, 2006
New York — With Internet sales at macys.com and bloomingdales.com on the rise, Federated Department Stores will invest $130 million in its direct-to-consumer businesses over the next two years.
The bridal segment is the major online sales driver, followed by home furnishings and apparel, said Federated Chairman, President and CEO Terry Lundgren at the National Retail Federation convention here.
He said capital would be invested in all direct-to-consumer segments, including Bloomingdale's By Mail, macyweddingchannel.com and bloomingdalesweddingchannel.com. Federated also operates a Web site targeting females aged 15 to 25.
Corporate direct-to-consumer sales are expected to grow to over $750 million by 2008 from about $450 million in 2005, Lundgren said.
On macys.com, he said, "We used to look at it as a store. Now it's a bigger store with perhaps the single largest potential (within the company) to grow."
Lungren added, "Online sales represent the fastest-growing part of our business and an outstanding opportunity for continued progress as we serve millions of new customers nationwide through our acquisition of May Co. Cross-channel integration is a vital component of our ability to maximize the potential of the nationwide Macy's and Bloomingdale's brands."
About 15% to 20% of ma-cys.com's assortment is different from the stores, he said. Sales and marketing for the site is based in San Francisco, while New York is home to the store merchandise group. Each group has about 100 employees.
As for bloomingdales.com, "It has trailed macys.com on purpose," he said. "Once the infrastructure is set for Macy's, Bloomingdale's will follow."
Lundgren said 72% of the transactions on macys.com are from consumers within a 20-mile radius of a Macy's store. Further analysis, he said, shows that "59% of customers are shopping online and then buying in the store; 20% bought on credit cards."
Perhaps more significantly, multi-channel shoppers are spending 20% more than single- channel shoppers, he said. As for earlier concerns the Internet might cannibalize store sales, "We have stopped worrying; it's what the customers want," Lundgren said.
Still, he said, "It will be a while before online will be as profitable as a store. Clearly, there will be double-digit (online) growth and improving profitability in the next few years."
The direct-to-consumer investment will include a new 595,000-square-foot distribution center designed to support online sales. The facility in Portland, Tenn., is scheduled for completion in spring 2007. Currently, online orders are fulfilled from several Federated distribution centers, which primarily supply the company's stores.
