In its second-largest acquisition, Amazon buys the company for $970 million.
Online sales, including travel, will approach $100 billion this year, researchers project. Non-travel online spending in 2002 was $43 billion and represented a 27% increase from last year.
Up 48% in 2002 over 2001, online retail was a bright spot in what were generally tough times for reail last year, according to The State of Retailing Online 6.0, a Shop.org annual study conducted by Forrester Research.
In the study of more than 130 online retailers, online retail sales, including event tickets, travel and auctions as well as merchandise sales, soared to $76 billion in 2002. The categories tracked in the Shop.org study, which include event tickets and travel, also reflect auction sales across the board. The study’s figures differ slightly from those of comScore Networks, released earlier, which place total e-commerce spending for 2002 at $73.2 billion, a 38% increase from 2001. Non-travel online spending in 2002 was $43 billion and represented a 27% increase from last year. The 10 retail categories tracked by comScore also include travel and event tickets besides merchandise, but do not reflect auction sales.
Shop.org’s figures show that e-retailers are edging closer to profitability across the board, with 70% of e-retailers reporting positive operating margins in 2002 compared to 56% a year earlier. Collectively, retailers broke even in sales in 2002, up from a collective loss of 6% in 2001.
“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,” says Kate Delhagen, consumer markets research director at Forrester Research.
Based on Forrester’s formula that factors in data from retailers, the self reported data of approximately 100,000 consumers through the year, and other information, the Shop.org study projects that online sales will grow 26% to $96 billion in 2003. They’re projected to account for 4.5% of all retial sales this year, up from 3.6% last year.
comScore’s year-to-date analysis of online consumer spending confirms that while it’s on an upward track, with weekly average spending of $1.52 billion for the six weeks ending April 20, representing a 10% increase of the same period last year, online consumer spending dipped during the Iraq war. “There is no shortage of opportunity in online retail," says Dan Hess, vice president at comScore. “But as the medium has matured it becomes more susceptible to the same factors that affect total retail.”
More recently, comScore`s weekly figures showed online spending rebounded with the war’s end, with average weekly spending online, at $1.76 billion, up 29% over the same two weeks last year.
Shop.org`s study found that shoppers new to individual retailers are helping to drive the growth online: about 40% of online customers are completely new to a retailer’s entire business. Also driving online sales is a shift online from other channels in several categories. More product categories represented double-digit percentages of all retail sales in their category, including the 32% of all computer and software sales that were sold online last year, as well as the 17% of all event tickets and 12% of all books.
The study found that retailers cut marketing costs online by shifting budgets away from more costly portal deals to pay-for-performance deals and search engine marketing. At $10 per order, Web-based retailers still had a higher marketing cost per order than either the store or catalog channels, but this was still a reduction from previous years.
Retailers are tightening cross-channel integration efforts, the study found. Some 63% of those surveyed, for example, have upgraded inventory management systems for better supply chain management, while 40% offer in-store inventory available through web sites and 78% allow in-store return of items purchased online. The retailers reported that 46% of their online customers also purchase offline, while 17% of offline customers purchase online. Retailers reported that the web influences 15% of their offline sales.
“Consumers are embracing multichannel retailing, and retailers are enjoying growth and increased loyalty as a result,” says Scott Silverman, executive director of Shop.org.