At a time of uncertainty in the general retail sector, online shopping sales rose by almost a half in the US last year and internet buying is becoming an increasingly profitable activity, according to a new report from Shop.org and Forrester Research.
The State of Retailing Online 6.0 featured a survey of more than 130 retailers, which found that sales revenues soared to $76 billion in 2002, up 48% on the previous year. In addition, 70% of respondents reported positive operating margins, compared with 56% in 2001. Collectively, retailers broke even in sales in 2002, up from a loss of 6% a year earlier. These results show reflect changing consumer habits as well as improvements in customer service (see
Customer Service Improving For Internet Shoppers, Finds Study).
“In a time when the retail industry has been extremely challenged, it is encouraging to see the online channel continue to grow, and even better, start to make money,” said Kate Delhagen, Consumer Markets Research Director at Forrester Research. “Last year was about breaking even, 2003 is about generating profits.”
The study predicts that online retail sales will increase by 26% in 2003 to $96 billion. This is equivalent to 4.5% of all retail sales and represents an increase from 3.6% in 2002. Almost a third of all computer hardware and software is now sold online and other popular internet purchases include event tickets and books.
“As multichannel retailers continue to fine-tune their online selling and marketing strategies, consumers become more comfortable shopping online with retailers they know and trust,” said Elaine Rubin, chairman of Shop.org. “It took the catalogue industry 100 years to represent 4.7 per cent of retail sales. It took online retailers only six years to accomplish the same feat.”
With marketing budgets down across the board, retailers were looking for greater value for their money in 2002. The report claims that savings were made by switching dollars away from costly portal deals to performance-based affiliate marketing and search engine marketing. As a result, retailers were able to cut the marketing cost per order placed from $12 to $8. Web-based retailers had the highest marketing costs ($10 per order) but still made considerable savings.
Multichannel retailers now regularly track the buying habits of their customers. According to the research, 46% of online customers also purchase offline and 17% of their offline customers purchase online. These multichannel customers have proven to be more valuable and loyal to retailers. In addition to direct online sales, these retailers claim that the web influences 15% of their offline sales.
“The growth of the online channel has ushered in a new era in retailing, which makes shopping more accessible to consumers and improves the overall shopping experience,” said Scott Silverman, executive director of Shop.org. “Consumers are embracing multichannel retailing, and retailers are enjoying growth and increased loyalty as a result.”
