E-commerce Still Chachinging Along

After 1998’s E-Christmas shopping season, most observers predicted a slowdown for digital retail sales. But a new study shows that the momentum of consumer e-commerce hasn’t skipped a beat.

Online retailers in Canada and the U.S. will collect US$36.6 billion during 1999, according to the report entitled “The State of Online Retailing 2.0”, conducted by the Boston Consulting Group for Internet retail trade association Shop.org.

The study surveyed 328 online retailers and conducted in- depth interviews with 158 of these participants.

The 1999 forecast is a 145 per cent increase over 1998’s revenues of $14.9 billion, which comprised 0.5 per cent of all retail sales in the U.S. and Canada. From 1998 to 1999, the number of orders received by digital retailers increased 200 per cent and the number of shoppers visiting these sites increased 300 per cent.

According to the forecast, computer hardware and software merchants will account for $7.4 billion of 1999’s total revenue, travel retailers will take in $7.3 billion, financial brokerages will realize $5.8 billion and collectibles are expected to total $5.4 billion for the year.

For the future growth of e-commerce, the online progress of traditional brick-and-mortar retailers will be crucial. The study found that, during 1998, 62 per cent of revenues flowed to “multichannel” retailers – those with both an offline and online presence.

The study also showed that online-only retailers spent $42 to acquire a new customer compared to $22 for multichannel firms. Net-only businesses spent 76 per cent of total revenue on marketing and advertising, but traditional retailers who sell online paid out just 13 per cent.

And though specific profitability data was not released, the researchers reported that multichannel retailers were more likely to be profitable than the “pure” Net players.

The BCG-Shop.org market forecasts are among the most optimistic in the industry. The numbers include the sites’ advertising and subscription revenues, though researchers say these totals account for only 5 per cent of the revenue estimates. Still, BCG-Shop.org’s 1999 estimate is twice that of Forrester Research’s prediction of $18.2 billion for this year. However, Forrester does not include revenue from financial-services brokers or from Canadian retailers.

In a separate digital-retail research development, Forrester announced that it will collaborate with the National Retail Federation, the world’s largest association of retailers, to gather e-commerce data. The NRF-Forrester Online Retail Index will track metrics for Net shopping sites, including sales and traffic, every quarter. The first index, based on third-quarter data, will be released this October. The group hopes to include 200 participating retailers by next year.