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Web Retail's Higher-Fliers
Amazon founder Jeff Bezos, right, with Wang Hanhua, president of Amazon's Chinese Web site. Web retailers said their future depends on international growth.
(By Natalie Behring -- Bloomberg News)
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By selling more goods, Amazon can cater to changing tastes, another analyst said.
"The beauty of not being specialized in this case is that you can weather the shifts in retail spending and customer desire," said Scott Tilghman, analyst at Soleil Securities.
On the other hand, some highly specialized companies' stocks have also done well.
Blue Nile, started in 1999, has stuck to its plan to primarily sell diamond engagement rings.
The company focused on its narrow luxury niche and targeted its marketing on making consumers comfortable buying big-ticket items online. The company went public in 2004 and last year had a profit of $13 million on $251.6 million in revenue.
One key feature in building a successful online business is constant investment in consumers' trust, said Mark Vadon, Blue Nile founder and chief executive.
"If they understand what they're buying, they're more comfortable and more likely to purchase," Vadon said.
Online auctioneer eBay, whose stock is up 11.8 percent in the past 12 months, allows consumers to talk directly with vendors through Web chats and has encouraged consumers to educate each other. This month, it created eBay Neighborhoods, virtual communities of buyers and sellers who can share knowledge about products.
Now, online retailers say that their futures depend on international growth and that they are continuing to export the lessons they've learned in the United States to emerging markets in Europe, Asia, and Latin America.
Only about 2 percent of goods bought abroad are purchased online, according to CIBC World Markets.
"The product selection abroad is so much lower than that in the U.S., both in terms of breadth of products and the number of categories," said Tilghman.
For investors, international expansion means not only more potential customers, but also spreading the risk around, he said. "There's additional opportunity to mitigate the risk of being exposed to any one country's economy."
