• by Gavin O'Malley  @mp_gavin, August 2, 2013

Despite being one of the world’s biggest fashion brands, Zara still ranks among the most digitally “challenged” retailers on the Web.

Yes -- along with Godiva, French Connection, and Club Monaco -- Zara has one of the most incompetent digital strategies of any online retailer, according to L2’s latest Digital IQ Index.

To reach its quantitative diagnosis, L2 -- a think tank founded by NYU Stern clinical professor of marketing Scott Galloway -- analyzed about 650 data points across four dimensions, including site and e-commerce, digital marketing, social media and mobile.

What are Zara and other digital dunces doing wrong? Galloway, on Friday, preferred to focus on what winning retailers are doing right. "The most successful specialty retailers are prioritizing technology investments, organizational incentives, and attribution metrics that drive online and in-store growth,” according to Galloway.

Which brands are winning the digital retail race? American Eagle, Victoria’s Secret, Coach, and Urban Outfitters, to name a few, by L2’s measurement. The retailers with the biggest year-over-year improvements in their digital IQ’s included Talbots -- up 44% -- Uniqlo -- up 35% -- and J.Crew -- up 31%.

Overall, however, most specialty retailers still have a long way to go. While 69% of retailers in the study supported online purchase with in-store return, just 14% have made the requisite investments at point-of-sale to support in-store pickup -- and only a handful have the capability to ship from the store, a service that provides for more flexible inventory management.

There is also substantial opportunity for retailers to make more tactical investments, including store locator optimization, use of email marketing to drive customers in-store, and robust local search engine marketing, L2 found.

How else can retailers improve their digital rankings?

Fix their email marketing, for one. Indeed, just 15% of retailers presently prompt users to modify their email frequency and content preferences during the unsubscribe process, L2 found.

Also, while two-thirds of retailers sell separate products for men and women, only 45% of those brand collect gender information during sign-up. What’s more, of these, just 43% send gender-specific marketing emails. Although 69% of retailers support online purchase with in-store return, just 14% have made the requisite investments at point-of-sale to facilitate in-store pickup.

Even Zara has hope for the future, according to Stasha Rosen, lead researcher on L2 Specialty Retail report. “Zara holds much potential, achieving particularly strong user-engagement (e.g., Instagram users tag their photos with #zara more than any other brand),” he said.

“However, one of the areas that held Zara back in the ranking is the mobile dimension,” Rosen notes, given that 35% of Google searches for "Zara" are from mobile devices. “Although 77% of specialty retailers have invested in a mobile-optimized site, Zara has yet to do so, making it a challenge for shoppers on the go to browse Zara’s Web site and use the site's store locator.”

As for other opportunities, specialty retailers now register 90% penetration on Pinterest and Instagram, making both “must be there” platforms, along with Facebook, YouTube and Twitter.

The growth of e-commerce -- already 8% of total domestic retail sales -- will outpace sales growth at brick-and-mortar stores over the next five years to reach $370 billion in sales by 2017, according to Forrester.

The real payoff of savvy digital strategies may be realized in-store, L2 suggests. In fact, while online sales -- PC and mobile -- are expected to reach $262 billion, this year, the Web will influence $1.2 trillion of sales -- or 43% of retail sales.

Zara did not return requests for comment by press time.