Successful ecommerce takes more than online presence, says new NASDAQ study

“Be disrupted, or disrupt yourself,” says Mike Stiller, associate director of corporate solutions at NASDAQ, in a phone call with VentureBeat. That’s the key takeaway from a new study he co-authored on ecommerce growth.

With the rise of companies like Amazon and eBay, traditional brick-and-mortar retailers have felt pressured to move their stores online, potentially killing off some of their physical stores in the process. But new findings from a team at NASDAQ show that beefing up your digital presence may not drive sales. “You have to identify the origination of the buy,” says Calvin Silva, another co-author of the study and a retail specialist at NASDAQ.

Online sales metrics don’t take into account when consumers go to a store to try out a product — say, a pair of pants — and later buy that item online. As a result, corporations may not realize the extent to which brick and mortar stores play a role in online sales.

In general, ecommerce sales are difficult to understand, in part because traditional metrics don’t apply to online stores. For instance, most stores compare year-over-year revenue to gauge success, but the same measurement may not work for online stores. “Target came out saying they had double-digit growth, and [the SEC] sat them down and said, ‘What does this actually mean? Do we need to come in and regulate the reporting here, so there’s a better understanding about ecommerce?'” Silva relayed to VentureBeat in an interview. Later the Target admitted to the SEC that its online sales growth was negligible.

In-store sales still trump sales made online, with ecommerce only accounting for 6 percent of total sales in the U.S.

Despite this, hedge fund managers are investing heavily in companies like Amazon as well as companies that transitioned early to ecommerce, such as Nordstrom. This trend only adds pressure for traditional stores to go online. The study also notes that growth managers, which make long-term investments in companies, are slowly dipping out of the race as hedge fund managers ramp up investment. Investment from growth managers in ecommerce has dropped by as much as 15 percent.

The most interesting story in this study is about companies that have been able to straddle the gap between having physical stores and maintaining a digital presence. Nordstrom, a beacon of self-disruption, according to Silva, opened an online store in 1998 and since then has made several strategic moves to keep the company growing.

In 2011, it bought HauteLook, a flash-sale site, for $180 million in stock. The company has made investments in online menswear clothier Bonobos and online shoe store Sole Society. It’s also struck up a partnership with online jeweler Baublebar. Nordstrom recently paid $350 million for Trunk Club, an online personal stylist.

In addition to buying and investing, the company has been wise to integrate new additions with its physical stores. For instance, if you buy an item on HauteLook, you can return it at a Nordstrom store. And Baublebar jewelry is sold in all Nordstrom stores.

Part of its success is knowing how brick-and-mortar stores drive sales and what an online presence can do to brighten sales figures. To that point, notice the number of online retailers that are opening up physical stores.  “Bonobo’s opening a brick-and-mortar, and Warby Parker is opening stores, so you’re seeing the reverse transition as well,” says Stiller.

“Ecommerce as an idea itself cannot be the end-all, be-all,” says Silva. He says companies need to know specifically how ecommerce is affecting their business. Just being online will not increase sales.