It said that while the stunning internet sales growth seen so far has been from a low base, it believes that the raw sales figures are starting to reach critical mass.
Moody’s explains that, when it comes to a credit rating, good web performance can offset declining comparable store sales. For example, it highlights how Gap mitigated a portion of its 4.0 per cent decline in comparable-store sales in fiscal 2007 with 23.7 per cent growth in online sales to US$903 million (£462.5 million).
The credit agency also said that a retailer’s choice of internet technology and supply chain set-up now count when it is assessing ability to repay debt.
This leaves retailers with another hard-to-measure benefit providing reason to continue with web technology investment. However, it should also give hope to those that have sunk millions into making sure that they are top of their e-commerce game.
The note said: “As companies put more effort into ramping up online sales, online fulfilment capabilities become a more important driver of how we evaluate supply chains. We consider a company’s web site to be a virtual store and consider a retailer’s investment in technology when evaluating its investments in store quality.’
It cites Amazon in particular as one retailer whose technology leadership and supply chain have influenced the agency’s credit rating. “Amazon.com’s strong fulfilment capabilities and industry-leading web site were two key factors in its upgrade to Ba1 with a positive outlook, from Ba2, in February 2008.”
However, don’t get too excited about how much of a premium a ratings agency will place on a flash web site.
Moody’s also warns that it will be watching closely to make sure that web sales are not just at the expense of store sales.
And, while a retailer can now consider its site as a credit to its business, Moody’s concludes that it expects to see continued investment to keep sites fresh.
The next time you are approaching you finance director for sign-off on budget for a web investment, you might do well to show him this.