Online Retail Will Grow To 20% From 4% Of Retail Sales Mix Today: Traditional Retail Survivors Selected By Best On The Street Equity Analyst

• On 8:23 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 retail 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: When traditional retailers begin to move into online retail, what are the most important components they should have in place and which of the companies you follow are doing the best job with their e-commerce businesses?

Mr. Tilghman: I'd argue that the most important components actually vary from company to company to a certain degree. Customer interaction, product display and ease of use are important for all sites, in our opinion. That said, transaction efficiency is more important for some retailers than others. Within my universe of coverage, I think Staples (SPLS), Best Buy (BBY) and GameStop (GME) do the best job of integrating products, customers and transactions on their e-commerce sites. Some of their competitors have sites that look plain, lack useful information to customers, are too slow to load or lack the draw to help either close the sale or inspire repeat visits. For Staples, the company's Web site is an integral part of the ordering process. Customers must be able to easily navigate the site and complete transactions without having to worry too much about the process. They need to find products quickly and efficiently, given that many procurement managers are also tasked with other workplace obligations. At Best Buy, the Web site is another leg of the company's selling model, an extension of the store footprint. So the focus for the company winds up being a little different than Staples because of the type of customer you are trying to serve. The purchase is likely discretionary, generally price-checked, subject to other customers' opinions and in many cases wanted as soon as possible. GameStop is similar to Best Buy with one exception - video games offer a much higher level of potentially interactive content that the company must share with its existing and potential customers. Release dates and upcoming products are also more important than in a traditional retail model, and we believe the company does a good job of offering that information to customers.

TWST: For bricks-and-mortar retailers, what is a good mix of online versus in-store sales?

Mr. Tilghman: I think by and large the retailers that have been successful in bricks-and-mortar locations and have moved to Web-based selling for a portion of their customer base are best off by maintaining the two. Customers will not always be able to manage purchases around the timing of delivery. For instance, someone working for a small business runs out of paper or ink/toner - they need to run out to the store and get it. We think the convenience factor is one that will be very difficult to overcome with e-commerce. From our vantage point, we think e-commerce for retail probably maxes out at 15% to 20% of all retail versus less than 4% today. A lot of customers aren't prepared to sit and wait, even if shipping will have the product in the next day. That time delay necessitates the retail model, especially given the immediate gratification "need" of so many customers, especially in North America. As a result we see Web sites as complementary rather than cannibalistic to existing retail locations and don't look for retailers to close locations. Additionally, we believe in-store transactions tend to drive larger tickets as a byproduct of customers being able to see, touch and experience the product, and as a result would generally not push retailers to shift too much of their mix to e-commerce versus their stores despite some of the cost benefits. We think the bottom line benefits from an in-store experience. I should also add that there definitely is a growing comfort level with security, the products - getting what one thinks they are getting - and the overall transaction experience of e-commerce that has really driven consumers in that direction. But again, looking at the companies I cover, I believe there really is no need for them to close their stores. The Web portal simply becomes an extension of their model that is supplemental rather than acting as a replacement.

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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