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Retailing: What’s working online Journal of Marketing。 1999。 63, ProQuest Psychology Journals Successful panies should examine all available channels and then tailor an approach according to their capabilities. Online retailing has e a long way since the gogo years of the 1990s: it generated $90 billion in revenues for US retailers in 2020, pared with just $8 billion in 1998. To study how the online strategies of today’s successful retailers reflect this maturation, McKinsey analyzed the 100 largest direct retailers in North We found that direct retailers with physical stores captured 52 percent of Inter sales in 2020, while those without stores garnered just 31 For each group, two broad strategies appear to be most successful. Together, the four models we identified have lessons for all retailers. Retailers without stores do well as either“efficiency machines” or “niche leaders.” The first approach is best for sellers of relatively lowmargin products like CDs, books, or puters, because the Web provides the global reach these panies need to gain scale. Efficiency machines —such as Amazon and Dell—invest heavily in brand marketing, innovative Web sites, and highly efficient sourcing and fulfillment processes. These investments create massive fixed costs, often running into the hundreds of millions of dollars, so efficiency machines must generate annual revenues of at least $750 million to be profitable. Such retailers, once successful, tend to generate strong cash flows,however. Amazon invested more than$400 million in marketing and technology in 2020, for example, while generating $477 million in free cash. The largest efficiency machines drive repeat business by offering deals to customers (for example,Amazon’s $79 annual membership, that includes unlimited two day shipping). Of the top 100 direct retailers, only 7 are efficiency machines, yet they account fora quarter of total online revenues. Niche leaders, such as L. L. Bean3and RossSimons, sell higherpriced, highermargin products (like apparel or jewelry) primarily through catalogs and over the Inter. Niche leaders build a loyal customer baseby offering quality merchandise, exceptional service, or both. The ability to acquireand retain customers is crucial, sincemost niche leaders are too small to afford expensive brand marketing and must relyinstead on targeted online or directmailcampaigns. The most innovative nicheleaders coordinate their channels by makingproducts from their catalogs easy to order online, for example, or by using their Website to display a wider selection of products than a print catalog could acmodate profitably. The 28 niche leaders we studiedgenerated nearly $15 billion in revenues—17 percent of which came from theInter—and