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Will E-Commerce Ever Beat the 1 Percent Problem?

By Mark W. Vigoroso
Apr 11, 2002 6:08 PM PT

With an online shopping population growing 5 percent annually, the Internet accounts for just 1 percent of total U.S. retail sales, according to the U.S. Department of Commerce.

Will E-Commerce Ever Beat the 1 Percent Problem?

And because of prevailing shopping preferences, e-tail's piece of the pie is not likely to swell much above 5 percent in the foreseeable future, according to analysts.

"Consumers still use the Web primarily as a research tool," Forrester Research analyst Carrie Johnson told the E-Commerce Times. "There is a perceived risk with high-ticket items, so most consumers spend much more offline."

As sales channels continue to intermingle, however, the Internet will influence more offline sales, making it increasingly difficult to measure the Web's financial footprint, analysts agreed.

Product Matters

The products consumers tend to purchase online are less expensive and less complicated, but this trend keeps a lid on total online retail sales. What is more, shipping costs are manageable only for smaller items.

"There are large categories of goods people are not buying on the Internet," GartnerG2 research director David Schehr told the E-Commerce Times, "especially big-ticket items like furniture, major appliances, automobiles and electronics, where direct sensory input is integral to the buying process."

The physical shopping experience also plays a pivotal role in American society, and research continues to illustrate many shoppers' need to speak with live salespeople, Johnson said.

Learning Channels

Despite these factors, the increasing prevalence of multichannel retail sales strategies could boost the Web's share of total sales.

For example, Schehr suggested, catalog retailers could expand new and repeat customer bases by allowing shoppers to submit catalog-based orders online.

At the other end of the process, in-store pickups of online orders could alleviate customers' shipping concerns, especially for larger items.

Cars Rev Up Sales?

Even with multiple sales and fulfillment channels, most online shoppers are hesitant to branch out beyond Web-friendly merchandise like books and CDs, according to Johnson.

One exception to this rule might be the automotive industry. Though online auto sales currently are hampered by legislative and infrastructure impediments, they could significantly boost the Web's overall sales impact, Schehr said.

"You only need to move a relatively few US$30,000 cars to start having a real impact on that [1 percent] figure, as opposed to $15.99 CDs," he noted.

No Balloon Effect

Analysts' long-term predictions suggest that unless consumers start buying new product categories, such as automobiles, online sales will plateau.

Extending an e-tail growth curve beyond 2005 shows that sales will not balloon over time but actually will flatten, according to Johnson.

So in the books category, for instance, the 20 percent share that is currently sold online would be unlikely to go beyond 25 percent over the long term, she added.

Big Picture

As time passes, however, e-tailers must understand the Internet's holistic impact on overall sales, not just the amount of sales completed online, analysts urged.

Indeed, by 2005, Web devices will influence 26 percent of overall retail sales, according to an estimate from Forrester Research.

Retailers face the challenge of accurately tracking in-store sales that stem directly from online research or promotions.

"Tracking methods are low-tech and subject to a lot of variability," Schehr said.

Pulse Reading

Short of assigning each customer a unique identifier, there currently is no way for most retailers to track the origin of every sale.

But as online sales arms become more integrated into overall sales efforts, and as their general importance becomes indisputable, it may not be necessary to measure Web-influenced sales separately, Johnson suggested.

She added that retailers wishing to collect empirical data on the Internet's impact can administer customer exit surveys.

For example, BizRate works with retailers like Office Depot and Circuit City to draw in-store customers to online surveys by printing the surveys' Web addresses on sales receipts.

"Does it really matter which sales originated online?" Johnson said. "As long as you are not struggling to prove the Web's value to the rest of the organization, it is better to understand the general impact of the Internet across sales channels."

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