The Internet divisions of traditional retailers have amends to make for the misery they have visited on their respective corporations.
The parent companies have spent tens -- or even hundreds -- of millions creating Web sites to stave off competition that largely vaporized on its own last year. To make matters worse, many were too late rolling out their sites to subsidize the effort with a stock offering while the IPO market was still booming. And now, those retailers that spent the most have found that their Web divisions' sales are hardly enough to offset all the operating expenses of what was once seen naively as a "self -- service" medium.
But rather than hiding behind their clipboards at corporate meetings, Internet executives within the big retailers are starting to redefine the criteria by which they are judged inside their companies, analysts said. Sales remain the primary measure of a Web division's overall performance, but other criteria now count, too.
Retail Web sites, for example, are becoming known as a way for companies to test and monitor their customers' purchase patterns, gauging early demand for items and funneling that information back to the companies' brick-and-mortar stores to make entire retail operations more efficient. Adding value in this way, analysts said, is the least these in-house Web executives could do.
"Sales aren't there for the online folks, and margins are lower than everybody had expected, so they're looking for other ways to give back," said Angela Kapp, an Internet consultant, and the former head of Estee Lauder's online division. "So they're saying, `Hey, here's our data.'"
Kapp said such overtures had been welcome, "since business in retail isn't so good overall, and you've got to get smarter now."
Among those online divisions helping to educate the corporate parent is ToysRUs.com, which handles online merchandising and product purchasing for Toys "R" Us. John Sullivan, general manager and vice president at ToysRUs.com, said the online division had helped the Toys "R" Us stores forecast sales for various products.
"We're able to get a true national read on products quickly," Sullivan said, whereas "in the stores, it's a real challenge to do that in every state and get a good feel for how things will sell."
For instance, Sullivan said the company gave extensive promotion to Nintendo's Game Boy Advance handheld console, and the software titles to go along with it. Late last year, the company's dotcom division worked with Amazon to send e-mail newsletters to people who were looking for information on the debut of Game Boy Advance, which was released early last month.
Starting in April, ToysRUs.com held 14 drawings for Game Boy Advance packs, which included different software titles with each game device. At the same time, it began taking advance orders for the game titles and the different color consoles.
Through the advance orders and the sweepstakes, ToysRUs.com learned that the most popular color by far for the game console would be indigo. Meanwhile, game titles like Hot Potato, which the Toys "R" Us stores had not planned to carry, looked like big sellers.
The stores quickly changed course, stocking shelves with Hot Potato, while also stocking and displaying the consoles to reflect the popularity of indigo. Given the zeal of video game buyers, Sullivan said, the advance marketing intelligence was critical. "With this product, if you're not on top of it in the first three or four weeks, you're missing quite a bit," he said. "So the more data you have and the quicker you can make an educated decision, the better."
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