This Hated Company Made the Top 5 Online Retailer List

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Shopping now is as simple as the push of a button. Photo: Flickr user Maria Elena.

Depending on whose numbers you believe, e-commerce will grow somewhere between 10% and 13% annually through 2018, reaching anywhere from $385 billion to $492 billion in sales.

That might still only account for less than 10% of the total $4.9 trillion retail sales marke, but they're huge numbers nevertheless, particularly when brick-and-mortar sales are expected to rise just 3.5% annually

Everyone lies online
Let's face it, competition for online sales is fierce. With few barriers to entry, the ability to appear bigger than you are, and no physical address necessary, just about anybody can hang out a shingle saying they're open for business.

And just about everybody does. The folks at BuiltWith suggest there are over 3.5 million websites with "cart functionality," meaning they could be considered an e-commerce destination. But not everyone makes money.

RJMetrics set about trying to quantify just how many e-commerce enterprises are making real money on the Internet, determining that roughly 110,000 e-commerce websites generate revenue on a significant enough scale to be considered meaningful.

How big is big?
Anywhere from 10% to 12% of all sites on the Internet are e-commerce websites, but while the largest account for just 1% of the total population, they also generate 34% of the total revenue (just over half of all e-commerce sites generate nearly two-thirds of the revenue).

Obviously, the Big Daddy of them all is , the humble online bookseller-turned-mega general store that in the second quarter of 2014 alone generated $19.34 billion in sales, a 23% increase from the year-ago period.

Even so, it experienced an operating loss of $15 million and a net loss of $126 million. Just because you're the biggest of the big doesn't mean you always make money.

But that's also because Amazon wants to be all things to all people (or everyone with an Internet connection, anyway). It regularly heads off on ventures that are costly up front, such as making hardware like its Kindle e-readers (to sell more e-books) and its Fire smartphone.

Like the Internet itself, Amazon is not static.

First-mover status doesn't hurt...
But that appeal to a wide audience is why online shoppers love Amazon. As the industry analysts at Prosper Insights & Analytics found in their eighth-annual consumer survey of customer favorites, 56.4% of all respondents listed as their No. 1 go-to destination for buying stuff online.

That's actually four times as many as the second-favorite destination, and almost nine times more than the third, fourth, and fifth place finishers.

According to Prosper principal analyst Pam Goodfellow, Amazon "has become almost a de facto search engine for a lot of consumers."

So who were these lower-ranked runners-up?

...but there's more to it than that
Before telling you who placed where, here are some hints. Prosper ranked the top 50 websites based on how 6,246 adult consumers answered just two questions:

  • What website do you shop most often for apparel items?
  • What website do you shop most often for nonapparel items?

That's it. Although it noted their income levels (and Amazon captured the attention of 59% of those earning $50,000 or more a year), it also sought to determine what would trigger their searches. Did the companies market themselves to customers through coupons or did they use advertising on TV or direct mail?

Forty-five percent of respondents cited face-to-face communication as the trigger, while coupons came in second with about one-third of consumers surveyed (note to e-tailers: don't use the Yellow Pages; only 3% of people sought you out after opening the phone book).

Actually, fingers don't walk very far beyond the keyboard anymore. Photo: Flickr user Jamie.

Also, did consumers employ "showrooming" tactics -- that is, going into stores to research a product, but ultimately buying it online -- or did they just let their fingers (and Google) do the walking for them? According to the survey, almost 44% would never do that, but more ominously, almost one-in-five do it regularly.  

Mobile devices are becoming important research tools, with almost one in seven consumers using a smartphone, tablet, or other mobile communication device to buy everything from apparel and electronics to beauty products and home decor.

So, with these criteria in mind, any guesses?
Did you dial up these names?
If you said eBay , Kohl's (surprise!), or Best Buy , congratulations! You named the companies that were ranked third through fifth.
While Kohl's might have been an eyebrow-raiser, particularly in light of its stumbles recently, the placement of world's biggest online garage sale and the top electronics store are probably along the lines of what you'd expect. Yet all three were lumped closely together, each only pulling in slightly more than 6% of all the votes.
But what about No. 2? It's considered loathsome by some and anathema by others, yet twice as many respondents chose it over the companies that grabbed spots three to five.
all the others.
A deal with the devil
Did you guess it was Wal-Mart
The retail giant that has conquered the grocery store and the shopping mall -- and is making its foray into convenience stores, too -- was the second-favorite online destination behind Amazon, selected by 12.7% of survey respondents.
Men and women both liked shopping its website, but skewed somewhat toward female shoppers -- 54.6% of female respondents chose it, compared to 45.4% of males. I'd guess that's because mom does most of the food shopping in a household, but Prosper Insight suggests she heads up more "family and budget-oriented households."
That could be. Remember all those higher-income folks Amazon was pulling in? Wal-Mart grabbed just 34% of those same households, so consumers in lower income brackets shopping at the retailer synonymous with pinching pennies and stretching a dollar makes the most sense.
And as we head into the all-important Christmas shopping season, that's a key distinction that would probably make it smart to simply ignore all the activists who rail against the retailer. Sure, Wal-Mart has some operational issues and comparable-store sales were flat last quarter, but the online store did well.
In fact, the site lifted the retailer up from negative territory, and it expects the website to do $13 billion in sales this year. While that's essentially negligible to a company that pulled in $473 billion in annual revenue in 2013, it's almost as much as eBay did for all of last year ($16 billion).
The countdown to Christmas begins anew
Last year, over the entire five-day period from Thanksgiving through Black Friday and on to Cyber Monday -- what ChannelAdvisor is calling the "Cyber 5" days -- recorded more than 1 billion page views. It was a highly promotional period for retailers, and this year promises to be the same, but expect Wal-Mart to try and build on the momentum it developed in 2013.
The discount king of retail might be hated by activists and ivory tower types, but consumers in flyover country have proved time and again they love its value, whether they're shopping at Wal-Mart stores or at its online site. In the end, that will matter more and will eventually be reflected in its stock performance, too.

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Rich Duprey has no position in any stocks mentioned. The Motley Fool recommends and eBay. The Motley Fool owns shares of and eBay. 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.

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