"Best On The Street" Retail Analyst From Hudson Square Research Picks The Online Retail Winners For This Holiday Shopping Season

• On 9:30 am EDT, Thursday October 22, 2009

67 WALL STREET, New York - October 22, 2009 - The Wall Street Transcript has just published its Online And Direct To Consumer Retailing Report offering a timely review of the sector to serious investors and industry executives. This 38 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Online Retailer Profit Margins Vs. Bricks-And-Mortar Retailers - Uptick In Internet Commerce - Secular Shift In Market Share To Internet Retailers - Post-Crunch Consumer Confidence - Growing Market Share For Online Travel Agents - Possible Consolidation Of HSN, Inc. - Amazon As The "Wal-Mart Of The Internet" - Online Marketing Vs. In-Store Marketing - Maximized Markdowns - Online Traffic Conversion Rates - Social Networking To Drive Brand Awareness - Online Sales Holiday Outlook - E-Commerce As A Path To International Expansion

Companies include: Abercrombie & Fitch (ANF); Amazon (AMZN); Ann Taylor (ANN); Apple (AAPL); Ask.com (IACI); Bebe (BEBE); Best Buy (BBY); Bidz.com BIDZ); Dell (DELL); Dick's Sporting Goods (DKS); Expedia (EXPE); GSI Commerce (GSIC); GameStop (GME); Gap (GPS); General Motors (GM); Google (GOOG); HSN (HSNI): Hot Topic (HOTT); Interactive Corp. (IAC); Liberty Media Interactive (LINTA); LivePerson (LPSN); MercadoLibre (MELI); Move Inc. (MOVE); Orbitz (OWW); Pacific Sunwear (PSUN); Quiksilver (ZQK); Ralph Lauren (RL); ShopNBC/ValueVision (VVTV); South Korea's Gmarket (EBGMy); Sport Supply Group (RBI); Staples (SPLS); Starbucks (SBUX); Target (TGT); Timberland (TBL); Urban Outfitters (URBN); VeriSign (VRSN); Wal-Mart (WMT); WebMD (WBMD); eBay (EBAY); hhgregg (HGG); priceline.com (PCLN).

In the following brief excerpt from just one of the in depth interviews in the 38 page report, an industry expert discusses the outlook for the sector and for investors.

R. Scott Tilghman is a New York-based Analyst with Hudson Square Research, Inc. He has been a sell-side Equity Research Analyst since 1997, focusing on a variety of consumer sectors, including retail, hospitality, leisure and restaurants. He previously worked for Legg Mason and Ferris Baker Watts. Mr. Tilghman was recently named by The Wall Street Journal as "Best on the Street" for his stock-picking performance.

TWST: Do the traditional retailers that you cover have the right management teams in place to continue to grow that e-commerce business? Who do you think has been particularly nimble in making that shift?

Mr. Tilghman: I do think it takes a slightly different skill set and the reason for that is, one, you have much more transparent pricing than you have in a traditional store-based model. Whereas years back customers would run store to store checking prices, now they can do it in a few clicks and, in fact, there are even Web sites set up to run the price checks for them. So pricing becomes a little bit more challenging, and we see some of the retailers actually moving to location-based pricing, where it requires a ZIP code be put in, in order to actually get the pricing data. But I think the biggest challenge from a marketing standpoint is when a customer walks into a store there are multiple points of potential engagement: end caps, signage, other displays in the aisles that can capture interest if that particular retailer has an overstock of inventory or if a manufacturer has provided them funds to help sell some product. When a customer visits a Web site, you almost have to look at it as a static experience. You have one page to capture their interest if they're not an existing customer or they don't know what they're looking for. So it makes it, I think, a little bit more challenging to engage the customer versus the traditional sales model and requires a little bit more forethought on the marketing aspect. What we've seen, again, with Best Buy and Staples in particular is they're very active in mining their rewards customers to alert them to specials, to set up links to some of the special deals, essentially showing the customers what the end caps are without the customer having to go to the site in the first place to see it. GameStop does that as well, enabling the company to alert customers to various trade-in promotions as well as keep them up to date on the pending product launches. The other difference, I would add, is in a store there is a limit to the amount of physical inventory, a number of SKUs that you can manage. You don't want to keep building the store larger and larger just to accommodate a broader array of products. That's a benefit of the Web sites that, again, both Staples and Best Buy have. And clearly we've seen it with Amazon (AMZN), that they're able to capture the long-tail products, broaden the array of offerings without the overhead that would be associated with doing that in a physical way. You also asked, I think, who has done the best job with that model. I'd argue, outside of Amazon, within the bricks-and-mortar companies, Staples has done, I think, a very good job at moving to that model largely to facilitate the ordering process, the delivery and contract business that we were talking about before to - it helps maximize the sell-through that individual contract sales associates are managing, and it also helps to improve order efficiency and accuracy. And as I mentioned, we find both Best Buy and GameStop seem to be effective in meeting the goals of a well-established e-commerce program plus, like Staples, have the necessary distribution infrastructure to ensure accurate and timely delivery of Web-based orders.

TWST: When we talked about engaging the customer in the store versus online, you said it's kind of a static experience online. But can a traditional retailer engaging in e-commerce maintain a competitive advantage if a customer has a "static experience" on its Web site?

Mr. Tilghman: I think the static experience is fine as a company's initial foray. I completely agree that the interactive element of the sites certainly needs to improve as technology enables it and as customers expect it. I'm not an expert on social media by any stretch of the imagination, but the push towards rating systems and product evaluations certainly is being captured by the companies and, in fact, we have Best Buy now on Twitter with a help force looking to help solve some of the basic problems, simply as a customer service tool but also as a relatively inexpensive marketing tool. What we've seen is some sites that have had the most success are the ones that have the most dynamic element to them with those rating systems and customer feedback systems.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 38 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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