According to a new forecast by Forrester Research, U.S. Online Retail will nearly double over the next five years, jumping from $172 billion in 2005 to $329 billion in 2010. The research firm feels that new innovations will make online shopping easier and more engaging, which will fuel accelerated growth in U.S. online retail sales. This prediction is supported by retailers current activities. There is currently heavy investment in emerging technologies, such as new analytic software, personalization tools, and optimizing online ad-spends based on return on investment.
Forrester claims that the result of these investments is that businesses no longer view the Web as a low-cost sales channel, but as a way of improving customer service and retention.
The company also predicts that eCommerce will represent 13% of total U.S. retail sales in 2010, and more immediately, sales of “general merchandise,” which is defined as all retail categories excluding auto, food and beverage, and travel, will top $100 billion for the first time in this year. The categories that should outpace the overall 14% compound annual rate include: apparel, consumer electronics, health and beauty, home products, food and beverage, and sporting goods.
While online retail is certainly a healthy niche, and will continue to grow, marketing to the online consumer is evolving away from the traditional banner ads to more innovative ways of personalizing a marketing message. The most prominent example of this is the amount spent on display advertising as compared to the amount spent on paid search advertising.
A recent JupiterResearch report forecasting the next five years in the U.S. online advertising market stated that online advertising total revenue will hit $18.9 billion in 2010. The firm predicts that paid search advertising “will be critical to this burgeoning growth and will eventually comprise a larger portion of total spend than display advertising.”
Many advertisers today are bidding for top position in their ad spends, but JupiterResearch predicts that this will slowly evolve into a more efficient and measured process. Advertising will be based on the revenue that each keyword generates.