According to The State of Retailing On-line 7.0, a Shop.org study conducted by Forrester Research of 150 retailers, 2003 on-line retail sales improved 51% to $114 billion, surpassing all industry expectations. Each on-line product category experienced strong growth. Forrester predicted that on-line sales will reach nearly 7% of total retail sales in 2004, nearly double the level of just two years ago, as on-line retail sales are expected to grow 27%, to $144 billion.
Amazingly, sporting goods was the fastest growing category in the study, with a growth rate of 104% in 2003. Sales are projected to grow 37% on 2004. Sales of sporting goods on-line in 2003 reached $2.3 billion and are projected to hit $3.2 billion this year, giving on-line sporting goods a 6% penetration in 2004.
All apparel grew 47% in 2003 and is projected for a 42% increase in 2004 to $11.7 Billion, a 6% share of the total apparel market. Travel remains the largest category purchased on-line, often serving as the first on-line purchase made.
After many years of losses, the on-line industry began to achieve profitability in 2003. For the year, on-line retailers improved operating margins to 21%. Even Web-only retailers improved profit by taking control of marketing costs which were reduced by half, and operating margins of those retailers were up 15% compared with margins of -16% in 2002. 79% of all on-line retailers were profitable last year, up from 70% in 2002. All on-line retailers improved profit margins in 2003.
“Consumers continue to expand their on-line buying into new product categories as they become more comfortable shopping on-line,” said Carrie Johnson, Senior Analyst at Forrester Research. “This mainstreaming of the Web into consumers lives not only fuels on-line sales, but also creates new opportunities for retailers to successfully grow their on-line businesses.”
According to Forrester, retailers believe that 24% of offline sales last year were influenced by the Web, up from 15% in 2002.
Successful on-line retailers are taking a comprehensive multi-channel strategy with 87% of retailers accepting in-store returns of on-line purchases. Last year, 77% of retailers collected customers e-mail addresses at their stores, and 55% of multi-channel retailers now can place customers on-line orders from their store.
And further data shows the trend continuing. The U.S. Census Bureau now estimates retail e-commerce sales for the first quarter of 2004 at $15.5 billion, an increase of 28%. According to the Census Bureau, e-commerce sales in the first quarter of 2004 accounted for 1.9% of total sales, while in the first quarter of 2003 e-commerce sales were 1.6% of total sales. In the fourth quarter of 2003, e-commerce sales were also 1.9% of total sales.
According to a recent Harris Poll, the number of people who are on-line has increased over the last three years from 63% in 2000 to 69% by December 2003. According to the poll the percentages of those on-line who are doing many activities often have also increased. The biggest increases are in the percentages of on-line adults gathering information about products and services was up from 25% to 41%. These statistics would appear to indicate that more than 28% of all adults is researching product and services on-line before making a purchase.
The ability for retailers (or vendors) to turn that research into a sale may well be one of the largest opportunities for sales gains outside of new store growth.
>>> With on-line sales growing at this rate, it makes what seemed like an expedient decision to outsource e-commerce operations now may look like a bad idea. When the contracts run out with their outsource partner, many sporting goods retailers will be left not knowing how to run an ecommerce business and without owning the names of any of their on-line customers…
