Online Skirmish Gets Intense For These Retailers

Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

According to comScore, this holiday season online spending reached ~$33.8 billion, up 13% from last year. E-commerce is becoming a core strategy for all retailers, and they are all focusing on building their e-commerce platforms. After leading the market as an off price retailer, TJX Companies (NYSE: TJX) is also now moving forward to gain further traffic by making an entry as an e-commerce off price retailer. In 2004 it launched its e-commerce platform, but after reporting disappointing sales the company decided to shut down this business. But realizing the value of online shopping, TJX recently acquired Sierra Trading Post, an off price e-commerce company, for ~$200 million.

Sierra Trading Post is an online discount retailer that offers apparel, home fashion, adventure gear and footwear at 30% to 70% below the price from other retailers. The company has increased its total area to 500,000 sq. ft to date and is selling almost 1000 brands. Sierra has grown at a great pace and generates $200 million of revenue every year, so TJX's decision to acquire Sierra seems to be profitable. This addition of a solid online platform will further include Sierra’s office, its fulfillment center, photography studios, its customer call centers, and its four outlet stores in Idaho, Nevada and Wyoming. TJX has been building its e-commerce team for the future, and now Sierra's expertise will complement it to create significant value.

Wal-Mart (NYSE: WMT), being the biggest brick and mortar retailer in the world, is planning to lead the online space too. Realizing the importance of online business, Wal-Mart has modified its outdated search engine for its website walmart.com. The new search engine, Polaris, will make it easy for customers to purchase products in a simplified and smarter way. When the customer enters his search item, Polaris tries to get them directly to the page with relevant items. This technology has increased the company’s online sales by 10% to 15%. With this advanced technology Wal-Mart has further acquired a 51% stake in the Chinese e-commerce site Yihaodian, with annual sales of $130 million. This site has more than 24 million registered users, which are continuously growing, and has more than 180,000 product categories like apparel, electronics, and groceries. This addition will boost Wal-Marts's e-commerce business, which is worth $7 billion currently and is expected to reach $9 billion in 2013.

With TJX and Wal-Mart both expanding their e-commerce platforms, they direct threats to online giant Amazon (NASDAQ: AMZN). In order to cope with this threat Amazon has to be innovative and sped up its expansion. Its latest strategy includes introduction of a new feature 'Friends & Family Gifting.' This feature will let customers know their friends special days, sending reminders while suggesting ideas about gifts. This was launched in the holiday season, and the strategy seems to be effective, as many people are buying. Competing against Amazon, Wal-Mart has started a same day delivery feature, something that Amazon had begun doing in 2009 in selected markets. To compete with this, Amazon has announced that it will be reducing its shipping time in some metropolitan cities by opening up more distribution centers. At present the company has 40 fulfillment centers, and another seven are expected to open in 2013. So Amazon is well protected with its ongoing initiative, and it is difficult for these big box retailers to steal from each others' established positions.

Focusing back on TJX, I see a good entry point in this stock as the company revamps its e-commerce strategy. It reported its November 2012 sales of $2.2 billion, which are up 7% compared to last year. The sales were robust during Thanksgiving Day, as the company remained committed to its off price strategy and providing innovative and fresh merchandise. The marketing campaigns were ramped up with attractive gift-giving initiatives. Its comps in Canada increased 2%, which was down 1% in 2011, while Europe showed significant results with an 11% increase, compared to 5% last year. 


ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own

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