A second report in as many weeks shows a dramatic surge in online consumer buying. The latest study, conducted by Forrester Research for Shop.org, the online arm of the National Retail Federation, credits women with helping boost Internet retail sales.
Online sales will rise 22% this year to an estimated $172.4 billion, according to a survey issued Tuesday.
The study of 137 retailers shows that Internet retail sales rose 23.8% last year to $141.4 billion. Excluding travel, which represents more than one-third of online consumer transactions, retail sales on the Internet rose 23.8% to $89 billion in 2004, representing 4.6% of total retail sales.
Last week, the Commerce Department's Census Bureau pegged first-quarter 2005 online retail sales at $19.8 billion, a 6.4% increase from the last three months of 2004 and a whopping 23.8% increase from the same period a year earlier. According to the government, online retail sales represent a mere 2.2% of all first-quarter retail sales. The difference between the two studies is that the retailers' survey was more encompassing, including areas such as travel, tickets, and auctions.
"Though initially adopted by men as a shopping tool, women are flocking to the Internet in droves to comparison shop, research, and buy," Shop.org executive director Scott Silverman said in a statement accompanying the study, The State Of Retailing Online 8.0. "Online retailers who sell products that are purchased by women are in a favorable position this year, as we expect those categories to grow substantially."
A study released last month by the online market research firm eMarketer said girls and women represented 51.6% of Americans online last year. While females make up about 51% of the U.S. population, and that ratio is expected to hold in the coming years, the proportion of girls and women on the Web should grow to 52.6% by 2008, according to eMarketer. That's a big change from the early days of the Internet, when males dominated. As recently as 1997, boys and men made up three-quarters of Internet users.
Shop.org projects categories with products purchased largely by women will have the biggest sales growth this year. For example, cosmetics and fragrances are seen growing 33%, with sales of over-the-counter medications and personal care rising 32%. Researchers expect other dramatic increases from jewelry and luxury goods (31%) and flowers, cards, and gifts (30%).
Though online sales account for about 5% of all retail sales, in some catgories they represent at least 10% of all sales, including consumer electronics (13%); cosmetics and fragrances (12%); toys and video games (12%); and flowers, cards, and gifts (10%). Shop.org says 13 categories will reach the 5% penetration point.
According to the study, multichannel retailers posted record profits last year, with overall operating margins rising to 28% from 21% in 2003. Catalog retailers claimed the best operating margins in 2004, rising to 32%, up from 28% a year earlier.
The lead author of the report, Forrester principal analyst Carrie Johnson, wrote that retailers will focus on innovation and growth by increasing their online and offline businesses. They'll also seek expansion overseas. "One way retailers will grow sales over the next several years will be by launching country-specific sites and operations to accommodate a growing number of international customers," Johnson wrote.
Search-engine marketing was the clear leader as a source of customers: 43% of customers delivered to shopping sites came from search engines, the study reveals. In 2004, 87% of retailers who participated in the study used pay-for-performance search placement and spent more than twice as much from their marketing budgets on this category than they did in 2003--$877,630 in 2004 versus $399,923 in 2003.
The study also concludes that retailers recognize the importance that their Web sites perform into their overall sales objectives. Retailers reported that the Web influenced 20% of in-store sales. So, the study says, retailers are striving to integrate their stores and Web sites.
Last year, 92% multichannel retailers included URLs on in-store materials, up from 77% in 2003. Eight in 10 retailers also used Web sites to promote their brick-and-mortar outlets. Also, 45% let consumers buy and redeem gift cards online and in stores, up from 30% in 2003. One in four retailers offered in-store product availability on their Web sites last year.