Retailers see Web offsetting spending slump

By Alexandria Sage - Analysis

NEW YORK (Reuters) - Retailers who scoffed at the web during the flush days of consumer spending are now diving head first into online initiatives, lured by that channel's resilience in the downturn.

More resources are pouring into retailers' Web operations, and brands from Juicy Couture to Louis Vuitton (LVMH.PA) are at the forefront of digital measures to drive sales, whether through Facebook pages, Twitter feeds announcing new merchandise or online communities, according to speakers at the Reuters Global Luxury and Retail Summits.

The once overlooked Web has shot to the top of worldwide retailers' priority lists as the recession has eroded sales at traditional brick-and-mortar stores.

While retail sales -- excluding food, gasoline and motor vehicles -- dropped 8 percent in the first quarter of this year, e-commerce sales were flat, according to Internet research firm comScore (SCOR.O).

"In the past (retailers) considered this channel a minor channel, nice to have," said Claudia D'Arpizio, a partner in Bain & Co's Milan office. "They were already aware of the potential but they were just postponing because they had other priorities. Now it's becoming a No. 1 priority."

Liz Claiborne (LIZ.N) Chief Executive William McComb agreed.

Online was an "underfunded and largely neglected component" of the apparel giant's business before a recent restructure to become more brand-focussed -- a strategy marked by bigger investment in digital, McComb said.

The scale-back in store growth this year ups the ante for e-commerce, he said. "We're going to increase the short-term goals of the productivity of those e-commerce sites."

Juicy Couture, one of Liz's fastest-growing units, sees a ramp-up in its site for this holiday season due to gifts. The trendy brand that is already on Facebook is developing iPhone (AAPL.O) applications, while its pink website includes blogs and allows fans to post photos of themselves in Juicy product.

Online, 8 percent of sales could grow to 10 percent this year and eventually make up 20 to 25 percent, said President Edgar Huber.

Online runway shows are helping boost JC Penney's (JCP.N) newly launched apparel brands, said Chief Executive Myron "Mike" Ullman, adding that the website also serves as a powerful means to communicate in-store sales promotions.

"It's just not based on convenience alone. It's also being able to see the whole assortment and browse," Ullman said.

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Upscale retailers online must be more creative to counteract the website user's inability to feel and appreciate the fine fabrics and materials that are the hallmarks of luxury.

A utilitarian site that may optimize volume but is short on image and user experience will fall flat with luxury shoppers, said Milton Pedraza, chief executive of the Luxury Institute.