And how stale merchandising can bring them down

By Mark Del Franco

Last holiday season, competition was fierce for meager sales growth. That meant markdowns, free shipping offers and other sales promotions to drive growth. As a result, margins were further compressed. And that’s precisely why gross margins are even more important this year.

“The Internet is driving gross margins down for people that haven’t made their product unique,” says David Solomon, co-CEO of New York-based investment bank Lazard Middle Market. “Unless you have a very special business model, you’re going to have a hard time growing in this crowded Internet space.”