March 26, 2001, 12:00 AM

Traditional retailers to dominate as more shopping moves online

A new report by the Boston Consulting Group says incumbents have the biggest opportunity as more people pursue multichannel shopping.

Shoppers are moving more of their purchases online, and traditional retailers with online channels stand to be the big winners, according to a new report from the Boston Consulting Group. Online sales in the nine leading consumer product categories, ranging from groceries through toys and electronics, have the potential to reach $168 billion by 2005 from their current $34 billion as consumers grow more used to multichannel shopping.

The greatest sales growth online will happen in the areas of leisure travel, grocery and clothing, according to the report. Boston Consulting analysts note that while the grocery category offers big opportunity, it also presents logistical challenges. Nevertheless, half of consumers surveyed said they anticipate spending part of their food budget online with in the next five years, which could grow the category to sales of $25 billion or more by 2005.

Internet retailers still are struggling with the economics of online sales as in most categories margins are not sufficient to cover high fulfillment and marketing costs, according to the report. Catalogers so far lead the way in generating profits in the online channel. “Catalogers have adapted to the online medium with consistent success," says Peter Stanger, vice president and leader of Boston Consulting`s b2c topic area in North America.

"They enjoy the advantages of established brands, existing infrastructure, and extensive experience in selling to customers at a distance." Boston Conculting also notes that other types of successful e-retailers in the future will include pure-plays such as Amazon who’ve achieved sufficient scale, and niche players that have built a strong franchise with a limited target population.

 

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