U.S. shoppers will likely spend over $61 billion (US$) online this year, according to a new report by the Boston Consulting Group.
The report, “The State of Online Retailing 3.0,” was released Monday by Shop.org, a trade association for e-tailers. The data also indicates that the business to consumer (B2C) e-commerce market will grow 85 percent in 2000.
“While financial markets for online stocks are in turmoil, the underlying growth of the online retailing industry continues unabated,” says David Pecaut, senior vice president and global co-leader of The Boston Consulting Group’s E-commerce Practice. “Online retailing is here to stay and will continue to gain significant share in 2000.”
1999: Explosive Growth Across Many Categories
Online automotive sales skyrocketed in 1999, growing 2,300 percent over 1998 sales. Other categories growing at exponential rates included health and beauty at 780 percent and toys at 440 percent. Total B2C online sales grew 120 percent last year to $33.1 billion — or 1.4 percent of all U.S. retail sales — while businesses spent an additional $13.1 billion online.
The travel, computer hardware and software, financial brokerage, and collectible categories remained strong last year, claiming 70 percent of the e-commerce market.
Donna Iucolano, chair of Shop.org’s Committee on Internet Shopping Research, commented, “While some online retailers have had to revisit their business plans and revenue models simply to remain in the game, others have shown tremendous revenue growth in the past six months.”
The Future of E-tailing
With a note of caution that echoed the bleak results of a recent Forrester Research report predicting the imminent demise of most dot-coms, Iucolano said, “The rest of this year promises to be a roller-coaster for e-commerce companies; however, those companies with a strong consumer focus and an eye toward maximizing profits will come through unscathed.”
There are major opportunities for growth and profitability that have not yet been exploited, according to the report. Specifically, companies could increase revenues by improving their checkout procedures to capture sales from the approximately 65 percent of online shopping carts that are abandoned before customers complete their transactions.
In some categories, e-tailers are posing a real threat to offline stores. The report says that by the end of 2000, 10 percent of the total sales of computers, books, music, and videos will occur online. The result could be that multi-channel and offline-only retailers will have to close some stores to compensate for lost sales.
The Real Test
The bad news for pure-plays is that catalog-based retailers are outperforming both store-based and Web-only merchants when it comes to fulfillment.
Fulfillment costs for catalog retailers are 18 percent lower than for pure-plays. Catalog retailers also ship more quickly — usually within 1.5 days after an order is placed — compared with 1.8 days for e-tailers and 1.9 days for store-based retailers.