Top 5 Largest Online Retailers – Who Are These Companies And How Did They Make It To The Top?

Here are 5 companies whose combined online sales  in 2011 amount to almost $75 Billion, US and Canada only. Let’s also have a look at their background and how did they manage to reach the top 5. The winner is one of the fastest growing companies in the world, a company born and raised online and probably the future of global retail. Let’s first have a look at the runners up:

5. Dell Inc.

Online sales: $4,609,728,000
2011 Growth: – 4%

dell logoDell is the only company in this top to have a negative growth.  The decrease in sales is a direct result of global PC sales contraction in 2011.  If your company is not named Apple and your business has something  to do with PC’s, than 2011 was probably one of the worst years for you. In fact Dell’s PC’s shipments declined 8% throughout the year so that makes dell.com’s sales 200% better than the overall company performance.

Dell was one of the first companies to integrate ecommerce in their sales process. Its e-commerce operation started off as a static page in 1994, integrated online sales features and soon enough they were selling more than $1 million a year, which as you might remember, was $1 million more than most of the companies.

Dell’s innovative approach to online commerce (customize and buy) was a result of:

  1. its business model that allowed companies and individuals to order customized computers via mail orders pre-internet era
  2. an increase in losses due to aggressive competition from its arch-nemesis – Compaq. Dell recorded losses of nearly $100 million in 1994, before launching Dell.com.

Following the launch Dell expanded its online operations in Europe and Asia and by 2000 it was already the market leader in PC sales worldwide. It stayed in the pole-position until 2006, when HP reclaimed the throne. Not bad.

4. Walmart.com

Online sales: $4,900,000,000
2011 Growth: + 19.70%

walmart logoWalmart is big. Really big. It operates more than 10.000 retail units in 27 countries. It’s net sales in 2012 increased 5.9% to 443.9 billion dollars. Big as it might be, Walmart did miss the start and that’s one of the reasons it’s “only” no.4 on our list. But worry not – the company expands its operations online as aggressively as it does with its brick and mortar stores and soon it will be fighting for the top position.

Jeremy King Walmart

Jeremy King – Walmart’s CTO

The company, whose first store opened in 1962, had launched Walmart.com in 2000, after it incorporated it as a separate company, based in Silicon Valley. Accel Ventures had a minority stake in the company at the time but the two agreed to disagree and in 2001 Walmart bought back Accel’s share.

As of that moment Walmart.com worked as a subsidiary of Wal-mart Stores, Inc. and it slowly started its development. CEO Mike Duke, an alumni of Georgia’s Institute of Technology, showed he meant e-business when it turned the company from a rigid, unambitious company to one of the biggest challengers to Amazon’s ecommerce reign.

Walmart started @WalmartLabs, and brought aboard the ship hundreds of talented engineers and business people, all focused on retail, social media and mobile. Yup, they do have all the buzzwords they need and as of 2011 they also have Jeremy King, one of the leading engineers at eBay, back in the day.

In 2011, Walmart agreed to purchase Kosmix, a social media startup founded by Venky Harinarayan and Anand Rajaraman in 2005. It’s worth to mention this just to get a glimpse in the kind of people and technology the company is now bringing aboard:

  • Mr. Harinarayan and Mr. Rajaraman previously founded and sold Junglee to Amazon for a reported $250 million
  • The two were angel investors in Facebook
  • Kosmix was funded by Lightspeed Venture Partners, Accel Partners, Dag Ventures and … wait for it … Jeff Bezos’ personal investment company Bezos Expeditions

Walmart is now acting as a Silicon Valley start-up when it comes to ecommerce – it’s lean, it values technology talent and it has a vision and a strategy.

[Read more about how Walmart and Apple are implementing Omnichannel Retail]

3. Apple Inc.

Online Sales: $6,660,000,000
2011 Growth: 27.40%

apple logoAs I am writing this post Exxon surpassed Apple to become, once again, the largest company in the world. However, Apple is still valued at $413 billion and it is still the coolest thing in technology. The company started its online sales operations in in november 1997, an year after acquiring NeXT Computers and bringing back Steve Jobs.

The whole online store was based at that moment on NeXT’s WebObject’s technology. This allowed fast implementation (1 year was needed to implement the whole online store) and a great online experience. As Steve Jobs declared at the time, $12 million worth of sales were generated using the online store, in the first month.

One of the cornerstones of Apple’s development for both offline and online sales was the Apple Store – the physical, brick and mortar, beautifully designed, concept store. When the first Apple Store was opened in 2001, Jobs wanted an experience rather than a shopping center. The Macs were beautifully designed, they worked better than most PCs but were still compared in terms of specs to PCs, as most consumers were not considering computing an area were design, experience or feeling had anything to do with a purchase decision. That was what the company needed to change.

The Apple Store - the greatest showroom an online store can get.

The Apple Store – the greatest showroom an online store can get.

The Apple Store started as a Store-within-Store experience when Steve Jobs stopped retail contracts with most retailers, except CompUSA. In exchange for being the exclusive Apple Dealer, CompUSA agreed to offer Apple a 15% area of all stores, and the right to have its own sales-person on-site.

People would walk in, experience the Apple ecosystem and even if they didn’t buy right then they would still remember the brand and later purchase online.

The Apple Store was a move that greatly helped Apple sell online. It was the most beautiful showroom, before online retailers even thought about having offline stores to increase market share.

The online shopping experience changed when, following 2001’s launch of the iPod, Apple released the iTunes Store in 2003. 5 years later, the iTunes Store was already the largest music vendor in the US and in 2010 it was the largest music vendor in the world. In Q1 2011 Apple’s iTunes Store revenue alone was $1.4 billion.

Along came the iPhone and, just as the company previously revolutionized the music industry with the iPod, the iPhone changed mobile, software and well…basically anything we humans do.

Apple’s retail concept is not just a store, it’s an ecosystem. It’s growing fast and it’s got a solid lock-in on its customers. Right now Apple’s online sales can only go up.

2. Staples Inc.

Online Sales: $10,600,000,000
2011 Growth: 3.90%

Staple logoThe first company in this list to cross the $10 billion in online sales threshold is Staples, the largest office supply chain in the world. Staples has more than 2000 stores in 26 countries but it plans to slash its brick and mortar space by 15% and focus on online sales.

The first store was opened in 1986, when the company was funded by certain private equity firms, including Bain Capital, co-founded by Mitt Romney (yeah, that Mitt Romney) who stayed on board for the next 15 years to help with the company strategy.

Staples.com was launched in 1998 and had a steady growth ever since, unlike its offline operations. Although often overlooked as a key competitor in the online retail arena, Staples did beat Apple and Walmart in this top so we should give credit where credit is due.

It’s main online sales channels are Staples.com, StaplesAdvantage.com and Quill.com. The infrastructure is based on IBM hardware and software and the company is ready to heavily invest in developing its online operations. It even started its very own innovation hub called E-Commerce Innovation Center.

Ok, long story short – the early bird catches the worm. Staples may not be the coolest brand in this list, but it was on of the pioneers in this field and it’s making lots of money online and unlike OfficeMax, and Office Depot, its main competitors, it has the best chance to make a shift online when its stores will stop being profitable.

1. Amazon.com Inc.

Online Sales: $48,080,000,000
2011 Growth: 40.60%

amazon logoYes, I know it may come as a shock but Amazon is, indeed, the largest online retailer in the world. It leads the online retailers’ top by a very long margin and it will continue to do so for a very long time, if we are to look at its continuous growth, its innovative practices and  its aggressive expansion.

The company was founded in 1994 by Jeff Bezos and Amazon.com went online in 1995, way before any of the other companies in this list were. Amazon was one of the few companies to exit the 1997-2000 dot-com bubble still intact. It would take another year after that for the company to turn a profit – in 2001 Amazon had its first profitable quarter – $5 million in profit on revenues of over $1 billion. Not very much but it proved its model.

kindle dx

The Kindle DX

It got sued by Barnes & Noble and Walmart (you might recognize these companies as some of those most affected by Amazon’s growth), it acquired some great startups (such as Kiva, Zappos, IMDB.com) and in 2007 launched its revolutionary device, the Kindle.

The Kindle was so successful that it changed the way we think of books and overall media. Right now Amazon sells more ebooks than hardcover in the UK. It is the biggest Android app seller in the world and it has access to its customers purchasing intentions through Kindle’s usage stats.

Although there is so much to say about Amazon one thing is clear: it is the top online retailer and it is eating into the large offline retailers’ sales too. Soon enough it might take their place.

I hope you enjoyed this list. Keep in mind that this post is based on Internet Retailer’s top 500 online retailers and features companies in the US and Canada. Figures are based on 2011 sales provided by different sources, usually the companies themselves. I recommend having a look at the full top and, as I will also do, purchase the full guide.

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