U.S. Sees Slight Rise in Online Sales

For the first quarter of 2000, U.S. business-to-consumer (B2C) e-commerce sales were up 1.2 percent to $5.26 billion (US$) from the fourth quarter of 1999, according to figures published by the Census Bureau of the Department of Commerce. However, despite the gains, e-commerce has yet to make a significant impact in overall retail sales .

The Commerce Department reported that sales in Q4 were $5.198 billion. Although the sales increase between the two quarters was less than 1 1/2 percent, it is significant in that holiday sales were included in the fourth quarter figures. Sales typically decline after the holiday season.

Despite the gains and the enthusiasm over e-commerce, online sales still represent only a fraction of total retail sales. Total retail sales for the first quarter were estimated at $747.8 billion, with business-to-consumer e-commerce accounting for 0.70 percent. In the fourth quarter, B2C sales amounted to 0.63 percent of total sales.

B2C sales figures are based on a sample taken from the U.S. Monthly Retail Trade Survey (MRTS). Sales totals are estimated for goods and services, but do not include travel services, financial brokers, and ticket agencies.

Second quarter results will be released in August.

Sales Patterns Unknown

Commerce Undersecretary Robert Shapiro was upbeat about the increase in e-commerce sales. "The continued growth of e-tail commerce indicates that online retail purchasing is not merely or primarily an end-of-year holiday phenomenon," said Shapiro.

Some economists, however, believe that fluctuations from quarter to quarter are not a reliable measure of sales patterns. Factors such as weather or holidays can significantly affect these short-term figures. These experts say it will take a series of long-term, sustained measurements to develop accurate sales figures.

Shapiro added that his department is in the process of figuring out how to categorize different types of online sales. Amazon.com, for example, could be categorized as a bookseller or a catalog company.

According to the way sales are classified, figures for computers, cars, books, sporting goods and catalogs grew in comparison to overall retail sales during the first quarter.

E-tailers Need Cash

Meanwhile, investment banking firm Goldman Sachs & Co. reports that some of the biggest names in e-tailing are about to find themselves strapped for cash.

According to a new report, companies that will require additional funding over the next year include Drugstore.com, eToys, Inc., PlanetRx.com, HomeGrocer.com, CDNow, Inc., Buy.com, Egghead.com and Fogdog.com.

Goldman Sachs analyst Anthony Noto says shares of CDNow have fallen 92 percent from their all time high, while the company's losses have reached $212 million. The company reports it could run out of cash by September, but hopes to have new financing in place by the end of June.

Established e-tailers will probably be able to find additional funding, said Noto. "Companies that have long-term sustainable business models will have access to the capital markets."

Noto also expects some consolidation in the e-commerce sector, particularly with smaller companies that may need to merge or be acquired by online companies with more economic muscle.