By Ylan Q. Mui
Washington Post Staff Writer
Saturday, October 28, 2006; D01

When clothing retailer Gap Inc. embarked on a plan to create an online shoe store a year ago, it turned to its Web customers for advice.

Here were shoppers who had no qualms about buying Gap khakis or Old Navy fleeces online, so shoes were no problem, either. But in e-mail surveys and focus groups, they told the retailer that they disliked paying for shipping and thought the process was uninspired. They would be willing to shop Gap for shoes, but their loyalties lay with other brands.

Two weeks ago, Gap quietly launched Piperlime, following those suggestions. The elegantly designed site offers fashion advice from celebrity stylist Rachel Zoe and year-round free shipping and returns. There are more than 100 brands of shoes, including Roxy, Rockport, Naturalizer and Charles David.

"That is a classic example of taking advantage of your existing customer base and trying to up-sell them," said Sucharita Mulpuru, an analyst at the technology consulting firm Forrester Research Inc.

The development of Piperlime underscores a subtle shift in Internet retailing. For years, the explosive growth in online sales was driven by scores of buyers shopping on the Web for the first time. With the number of new online shoppers leveling off, retailers are left looking for ways to ensure that their existing customers spend more and have been luring them with new merchandise, free shipping and special discounts.

Online sales growth has slowed significantly in recent years, though still outstripping that of traditional retail stores. In 2002, online retail sales, excluding travel, were up 43.8 percent, to $53.5 billion, according to trade group Shop.org. This year, online sales are predicted to increase 21.5 percent, compared with 2005, to $138 billion.

Still, targeting existing online shoppers can be lucrative for retailers. A report this month by Forrester Research showed about 10 percent of online shoppers had spent $500 or more during the past three months. These heavy Web shoppers have an average household income of $91,296, and more than half have a college degree, Forrester said.

Getting them to spend more on the Web is important, but Erika Serow, a partner at management consulting firm Bain & Co., said online retailers also need to focus on convenience, easy navigation and checkout, and providing detailed information about merchandise. By contrast, new shoppers are most concerned that their transactions are secure.

"You don't need to fancy up the Web experience," Serow said. "You just need to make sure it is as consistent and pleasant as the in-store experience."

That was the goal of Wal-Mart Stores Inc. when it unveiled its revamped Web site this week featuring simplified design and pop-up boxes with product details. A link to items with price reductions has been pushed discreetly to a column on the left side of the page to make way for rotating photos of the latest fall bedding, modern baby furniture and the newest high-definition television.

"Our role within Wal-Mart . . . goes well beyond e-commerce," Walmart.com chief executive Carter Cast said at a news conference this week. "We want to make it easier for them to shop Wal-Mart."

Serow said shoppers decide how they want to shop -- at the mall, online or by catalogue -- before choosing which stores to visit. Trying to reach new shoppers online is close to futile. If they're aren't shopping in the stores, they probably will not shop online. Ensuring that existing customers have the option of making purchases over the Internet is crucial, she said.

"No one is going to miss the opportunity here to make sure their best customers can shop in the store or online," she said.

To that end, retailers are ensuring that pricing and promotional campaigns are the same online and in stores. Nearly half of retailers last year offered free shipping, Forrester said, and many more offer in-store pickup, even if it's just during the holiday season. Existing customers often have access to special online discounts, and e-mail alerts frequently go out once a week or more.

Online retailing also allows companies to track their shoppers more closely than ever. In fact, a recent study by Forrester found that 22 percent of off-line purchases are influenced by the Web. Retailers are using the information to tailor their sites -- and their stores -- to what customers want.

That is the tactic Gap used to develop Piperlime. All promotion for the site has been aimed at Gap's current customers. The store is promoted on the sites of Gap's three brands: its namesake, Banana Republic and Old Navy. Customers who shop with their Gap credit cards can get 10 percent off their first purchase. Another e-mail alert is planned for the store's official opening on Wednesday.

"The core of our marketing strategy is really to leverage our existing customers both in-store and online," Gap spokesman Alex Clark said. "Now we're truly able to tell our customers that we'll dress you from head to toe."

Internet retailing is still far from reaching maturity, however. Shop.org estimates that online sales will make up only 5.5 percent of total retail sales this year. Mulpuru, the Forrester analyst, estimates that the market share of online retailers could rise as high as 15 percent. After that, she said she expects the booming e-tailing industry to plateau.

"At the end of the day, most people still want things immediately, or they want to touch and feel an item. Online is never going to solve that problem," she said. "No matter how many beautiful pictures you have, that's not going to be a substitute for trying on a dress or trying on a shoe."