Many department stores have traditionally set themselves apart by installing in-house labels and designer lines made exclusively for them. The move was designed to produce higher profit margins than national brands when times were good, but many fear that the strategy could come back to haunt them now that the markets have turned. Many stores are being forced to mark down the prices of such exclusive lines in a move that could end up hurting the brands' image.

Unfortunately, retailers are also unable to siphon off some of the pain to suppliers since they are themselves the manufacturer. This means that instead of the markdown allowances that national brands provide, these retailers are stuck with even greater losses than they have already experienced. In effect, the strategy is a "double edged sword" says one analyst with Deutsche Bank.

To make matters worse, many retailers are also forced to pay minimum royalties to the brand designers. The WSJ highlighted one such example with Sears Holdings Corp. (NYSE: SHLD) and Kmart, who agreed to pay a minimum of $65 million last year and $20 million this year to Martha Stewart Living Omnimedia despite the lines not meeting sales targets by a long shot.

In the end, many retailers still insist that these products are necessary to differentiate themselves from their competitors. But in a poor economy, it may be wise for investors to start looking at the income states and sales forecasts more closely to see just how much of a retailer's inventory is tied up in these goods.

Related Companies
Kohl's Corporation (KSS)
J.C. Penney Company, Inc. (JCP)
Retail Ventures, Inc. (RVI)
Wal-Mart Stores, Inc. (WMT)
Macy's, Inc. (M)

In completely predictable move that nonetheless is generating lots of attention, Yahoo Inc.’s (NDAQ: YHOO) largest shareholder has criticized Microsoft Corporation’s (NDAQ: MSFT) threat to wage a proxy battle and lower its offer.

Legg Mason Inc. owns around 7% of Yahoo, giving portfolio manager Bill Miller obvious incentive to try and drive the offer price up.

In a WSJ interview, Miller said, “Telling shareholders you're going to take something away from them is not a way to get their support,” in a reference to Microsoft’s threat to simply pull its bid. Of course, in reality telling shareholders that the deal will soon be off the table seems to be a very good negotiating tactic for Microsoft. Yahoo shares were trading around the $20 per share mark prior to Microsoft’s $29 per share bid, and Yahoo shares are likely to stay around $20 for a long time if the deal doesn’t happen.

Miller would understandably like Microsoft to raise its offer – what Yahoo shareholder wouldn’t? But with no viable alternatives for Yahoo, why should Microsoft bid against itself?

The very need for Miller to speak out against Microsoft’s threat proves the threat is already working: Yahoo’s largest shareholder is worried that the Microsoft deal will disappear.

Related Companies
Google Inc. (GOOG)
Time Warner Inc. (TWX)
QuickLogic Corporation (QUIK)
Hollywood Media Corporation (HOLL)

The U.S. economy may be headed into a recession, but e-commerce sales are estimated to grow 17% to $204 billion this year. The Forrester Research report sees a continued increase in e-commerce spending as value-shoppers go bargain hunting and affluent investors seeking the comfort and convenience of shopping from home. This is great news for many online retailers as well as online marketing companies.

"From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate," said Scott Silverman, executive director of Shop.org. "But the fact that online sales will increase substantially this year demonstrates the resilience of the channel and is a testament to the value and convenience most customers find when shopping online."

Companies like Amazon.com Inc. (NDAQ: AMZN) and eBay Inc. (NDAQ: EBAY) stand to benefit the most from the increased online spending given their market leadership positions. Unfortunately, much of this growth is already priced into the stocks. Amazon.com trades at 68x earnings with a P/E to growth ratio of 2.19, which means that the stock may be overvalued given its most recent growth. Meanwhile, eBay is trading at 125x earnings with a P/E to growth ratio of 1.25, which makes it a little more affordable.

The Forrester Research report also indicated that search engine marketing continues to be the most effective way to reach new customers. In fact, 90% of all online retailers use pay-for-performance search placement and 79% said they will make such tactics an even greater priority this year. Currently, the survey found that around 35% of all sales comes from search engine marketing venues.

These increases should help boost stocks like Google Inc. (NDAQ: GOOG) who rely on search engine marketing for much of their income. Other potential benefactors include Yahoo Inc. (NDAQ: YHOO) and Microsoft (NDAQ: MSFT), who both have their own online ad platforms that many online retailers use to advertise their services in an increasingly competitive market.

"What’s spearheading online retail sales growth is a tale of two shoppers that visit the web for very different reasons," said Sucharita Mulpuru, Forrester Research principal analyst and lead author of the report. "The casual shopper goes online to look for the best price, leveraging the transparency of the Internet to save money. However, more affluent customers appreciate the convenience of shopping online and are not necessarily looking for the best deal. Retailers would be wise to recognize there are significant opportunities within both audiences and should market to them accordingly."

In the end, this is great news for the only positive segment of the retailing market.

Related Companies
Borders Group, Inc. (BGP)
Barnes & Noble Inc. (BKS)