2011 Hot 100 Retailers
A Special Report Sponsored by
Click on chart to see a list of the Hot 100 Retailers.
Retailers with unique business models — and those with both the means and the fortitude to expand while others contracted or stood pat — are the stars of the 2011 edition of the STORES Hot 100 Retailers.
The top of the list illustrates this abundantly with the likes of Amazon, Apple and Netflix, each with a distinctive enough approach to retail to preclude having a major rival operating in the same space. Also among the highest-ranked Hot 100 Retailers are apparel retailers, grocers and an appliance dealer that have continued to add stores — either through new construction or acquisition — in spite of consumers’ marked lack of enthusiasm for shopping over the past 12 months.
The nation’s lackluster economy isn’t likely to ignite anytime soon, according to a host of experts and indicators. At the highest level of government, the Federal Reserve indicates that the first six months of 2011 performed below expectations and things may not get much better in the second half of the year — and perhaps even 2012.
“We don’t have a precise read on why this slower pace of growth is persisting,” Fed chairman Ben Bernanke admitted. “Maybe some of the headwinds that had been concerning us — like weakness in the financial sector, problems in the housing sector, balance sheet and developing issues — some of these headwinds may be stronger or more persistent than we had thought.”
There are plenty of statistical measures indicating how things are:
- Nearly half (48 percent) the Americans polled by CNN in early June feel that another Great Depression is likely to begin during the next 12 months.
- Among U.S. manufacturers polled in May for Grant Thornton’s quarterly Business Optimism Index, 12 percent said the economy will get worse in the next six months; only 4 percent felt that way in February.
Retailers that have found ways to navigate the rough waters and boost sales by double digits include chart-topping Ascena Retail Group, whose major businesses are the Dress Barn, Maurices and Justice apparel chains.
Dress Barn acquired Tween Brands in November 2009, which boosted sales enough to lift the company to the top of the Hot 100 Retailers list. The company changed its name to Ascena Retail Group on January 1; with a fiscal year ending July 30, 2011, it didn’t report annual figures in time to include in the survey.
Overall, the women’s apparel market rose 3 percent last year and the specialty stores segment increased its leading share of market to 32.4 percent, ahead of mass merchants, department stores and other channels, according to NPD Group.
Each of Ascena’s brands caters to a distinct market segment, with the flagship chain (now styled dressbarn) targeting 35- to 55-year-old women seeking casual fashion at value prices. Maurices aims for the 17- to 34-year-old woman looking for fashion in casual clothing, career wear and accessories. Justice’s 7- to 14-year-old customers seek hot fashions in an environment designed for them. Maurices has been the strongest performer of late, enjoying double-digit comps well into 2011.
“Focusing on specific segments is a key strategy of many of the Hot 100 apparel retailers,” says Bryan Gildenberg, chief knowledge officer for Kantar Retail. “Both Ascena and Urban Outfitters do a terrific job running multiple formats off a common platform that appeals to significantly different audiences.”
No. 2 Amazon has been hailed as the future of retailing ever since it opened its virtual doors 16 years ago; its 46.2 percent year-over-year sales growth during the alleged economic recovery is a testament to the changing behavior of consumers, who increasingly prefer to seek bargains online rather than burn gasoline searching from store to store.
Amazon has maintained a steady stream of initiatives to entice consumers to keep spending. These include a test of online grocery selling in its Seattle home market and its growing role as publisher of e-books for its Kindle reader. There are music downloads, a cloud-based music locker and streaming video, all part of Amazon’s technology-based approach to retailing.
Another major contributor to 2010 sales growth was a full year’s worth of sales contributions from Zappos.com. Amazon paid approximately $900 million for the online shoe seller two years ago, adding not only $1 billion in annual sales but a customer service model that has been the envy of the e-commerce universe.
“It’s our belief that Amazon will remain on the Hot 100 list for years to come in the United States, and that by 2016 it should be one of the top 10 retailers in the world in terms of size,” Gildenberg says.
Food retailers joining Fresh & Easy Market in the Top 10 include Tops Friendly Markets, once part of Royal Ahold’s U.S. supermarket holdings and now controlled by a Morgan Stanley private equity fund, and Bodega Latina, operator of El Super supermarkets.
Fresh & Easy Market remains among the hottest of the hot primarily because British parent Tesco persists in expanding its toehold in the New World. The deep pockets of the world’s fourth-largest retailer are financing the expansion, even though Fresh & Easy has lost money ever since opening its first store four years ago (it projects profitability by 2013). After concentrating on Southern California and the Phoenix and Las Vegas markets, Fresh & Easy recently opened a dozen stores in Northern California, including two in San Francisco.
Tops Markets spent the early years of this century being downsized by Ahold USA, which sold off all its convenience stores in 2005. The remaining supermarkets, a handful of which are franchised, were unified under one banner — Tops Friendly Markets — and battled territorial incursions by upstate New York rival Wegmans. Tops won a bankruptcy court battle to take over 79 supermarkets operated by Penn Traffic in January 2010. Tops closed some of those units and has sold off clusters, including a group of seven ordered by the Federal Trade Commission due to antitrust concerns. Tops is edging toward the c-store business once again, this summer opening a remodeled store and its first on-site fuel station in the Syracuse, N.Y., area.
Bodega Latina’s appearance on the Hot 100 is a reflection of the ferment taking place among grocers seeking to serve the rapidly-growing Latino population. Originally these markets were run by independent merchants, with the more entrepreneurial adding branches as the local ethnic populations grew. These chains initially grew fastest in Southern California, Texas and South Florida, but now can also be found in North Carolina, Denver, Chicagoland and New York’s Long Island.
How fast is No. 4 hhgregg growing? Just last month, the consumer electronics and appliance retailer opened its first 10 stores in South Florida, with more in development.
“We’re going to blanket the market,” says CEO Dennis May. “We like to enter a market with a full advertising share of voice and, to do that efficiently, we need to enter a market with enough strength.”
hhgregg was founded in 1955 and grew slowly for most of the second half of the 20th century. After opening 110 stores over the last two years it is now approaching 200 units and passed the $2 billion sales plateau last year.
A lot of manufacturers sell their wares directly to the public, but none do it better than Apple, renowned for the design of its technology products but equally creative in conceptualizing and building retail stores. Much of the credit goes to Ron Johnson, a former Target merchant who grew Apple’s physical store base to well over 300 and helped conceive the Genius Bar.
A proponent of retailing-as-theater, Johnson has been tapped to succeed Mike Ullman as CEO of J.C. Penney. “If he can take a little bit of that magic and sprinkle it onto J.C. Penney, you could really create the next generation of retailing,” says Citigroup retail analyst Deborah Weinswig. “We’re at a very interesting kind of intersection right now where retail needs to be fun, it needs to be exciting.”
Apple typically sites its stores in high-traffic locations in quality shopping malls and urban shopping districts. The typical Apple store generates sales of $4,046 per sq. ft.; if iTunes downloads are included, that figure rises to $5,914, according to investment bank Needham & Co. For comparison purposes, Tiffany’s sales are $3,070 per sq. ft., Coach $1,776 and Best Buy $880.
With consumers venturing out and spending less, retailers delivering entertainment to homes are benefitting, and none more so than Netflix. Cable operators Time Warner and Viacom reported depressed DVD sales and DVD revenues dropped 15 percent last year, estimates IHS Screen Digest; by contrast, Netflix added 3.3 million new subscribers in the first quarter of 2011.
Netflix has evolved from a DVD rental business to a service streaming video games, movies and classic TV shows. By some measures, Netflix is the master of the Internet: It generates nearly 30 percent of peak web traffic, according to research firm Sandvine, whose CEO Dave Caputo says, “The dramatic growth of Netflix and its impending global expansion are prime examples of a growing appetite for real-time entertainment.”
H&M opened its first U.S. store in 2000 on New York’s Fifth Avenue; now approximately 10 percent of its worldwide stores are located in this country. In addition to its rapidly growing store base, H&M says it hopes to have a full-blown e-commerce site aimed at American shoppers up and running by the end of this year or early 2012, and a collection designed by Donatella Versace is scheduled to be released domestically in November.
Overstock.com moved into the elite top 10 with a 23.8 percent jump in year-over-year sales. In January, the company debuted its O.co domain name in an effort to be more recognizable across the 90 countries it operates in. Now the shift is on in the U.S.
Another sales spark may be linked to the increasing number of businesses it operates. Earlier this year the company began selling discounted hotel rooms; last month it revealed plans to offer deals on auto and home insurance.
Still, the double-digit sales gain posted this year may be hard to replicate now that it has been chastised and penalized for violating Google rules. It seems that, inadvertent or otherwise, Overstock.com manipulated Google’s ranking system by working with websites operated by colleges and universities: It promised schools that students and faculty would receive discounts in exchange for the Overstock.com link being embedded in the school websites.
Correction: The Hot 100 chart in the print edition of the August issue contained incorrect data for The Buckle and Cato; the correct data is reflected here. STORES regrets the error.
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