SEC Finds Traditional Retailers Struggling To Adapt To Web

By Pete Rizzo, Editor (@pete_rizzo_)

Traditional retailers like Walmart, PetSmart and Target may frequently tout double-digit online sales growth figures to investors, but new disclosures from the U.S. Securities and Exchange Commission (SEC) reveal that these gains comprise only a fraction of their total sales.

This was the main finding of an SEC letter campaign conducted over the summer, and profiled in an August 27 report from The Wall Street Journal. In a series of correspondences, the SEC sought to investigate why some retailers boast about their web performance to investors, but refrain from disclosing how key online metrics impact their total sales.

The Journal uncovered quantitative figures that show that online sales only comprise a small percentage of the total sales of big-name U.S. retail giants. Further, though some retailers did respond to the requests, many cited their omnichannel strategies as a defense for their poor eCommerce market presence.

“Our organization views omnichannel direct-to-consumer retailing as a defining strategy across all of our brands. We’re happy to add the enhanced disclosure.” Bill McComb, CEO of Fifth & Pacific, told the media outlet. Fifth & Pacific revealed details about its online sales despite initial hesitation, the media outlet said.

In this PYMNTS.com Data Point, we’ll break down the figures uncovered by The Wall Street Journal and profile statements made by major retailers so you can learn which major eCommerce players are walking the walk and which are just talking the talk when it comes to online sales.

SEC Communications Reveal New eCommerce Sales Figures

The SEC found that eCommerce sales did not have a substantial impact on the total sales of several notable retailers. Despite its strong online presence since 2000, Walmart revealed that web sales contributed 0.1 to 0.2 percentage points to its 2.4 comparable-store sales in fiscal year 2013. The retailer made plans to bolster this figure through an improved logistics strategy earlier this year.

Target has publicly indicated that its online sales comprise less than 2 percent of its $73 billion in annual sales. It issued a more specific figure to the SEC, but redacted the number from public filings, the report said. PetSmart indicated that eCommerce accounts for 1 percent of its sales. Target and PetSmart both made statements saying that eCommerce was “immaterial” to their overall business, thought PetSmart said it “considers eCommerce a growth opportunity.”

The article suggested that traditional retailers may not want to disclose their poor performance because not all traditional retailers are struggling to adapt to the web: Online sales at Cabela’s and Nordstrom constituted 33 percent and 10.7 percent of their respective total sales.

The Omnichannel Defense

Some retailers, like Fifth & Pacific and Target, pushed back against claims that they were misleading shareholders. Retailers argued that it doesn’t matter which channel a purchase comes from, so long as the company is profiting from the sale.

“There’s such a blurring of the lines that it doesn’t make sense to delineate between whether it’s an online or in-store sale,” Casey Carl, Target’s president of multichannel, told the Journal.

Bolstering this claim is evidence that discerning between online and in-store sales is becoming passé in the industry. Staples, which did much to bring the omnichannel approach to the mainstream earlier this year, is no longer separating online sales from in-store sales in its reporting, Internet Retailer has indicated.

ECommerce Top Performers Revealed

While the industry may be increasingly focused on omnichannel, the report suggested that investors want to use eCommerce metrics in their decision-making.

William Smead, an investor and portfolio manager at Smead Capital Management, told the Journal that strong online sales indicate retailers “can adapt to the changes in how people shop, and will last a long time compared to their competitors.”

This statement refuted claims by retailers that the need to keep this information confidential outweighed the benefit to stockholders.

For more on the SEC’s findings, read the full report here