December 31, 2003, 12:00 AM

Doing the math

(Page 2 of 2)

The difference in numbers between the Commerce Department and comScore is the result of differing methodologies. The Commerce Department surveys 11,000 retailers to determine their e-commerce sales while comScore monitors the online behavior of a representative cross-section of the 1.5 million online consumers who have given comScore explicit permission to monitor their behavior. But each also includes somewhat different categories from the other. Both researchers include buying at Quixtar.com, the online arm that supports Amway, and other such sites.

Interestingly, the Commerce Department and comScore benchmark their numbers against each other. When the Commerce Department comes out with its numbers two and a half months after comScore, comScore often points out that its numbers are not a whole lot different from the Commerce Department’s, the benefit of subscribing to comScore being that a customer will get information that it can act on earlier than if it waits for the Commerce Department. ComScore subscribers also get weekly data vs. quarterly from the CommerceDepartment and category data. At the same time, a source familiar with the Commerce Department’s methodology says researchers there take comfort in knowing that their numbers are not far off from comScore’s.

A shift in behavior

Other researchers report e-commerce numbers as well. BizRate.com Inc., a shopping comparison site and quality monitoring company, says consumers spent $24.45 billion online in the first half of 2003, almost identical to the Commerce Department’s figure. BizRate bases its numbers on the shopping activity at the 2,000+ retail sites where it has contracts to monitor shoppers’ activity. It adds to those numbers the publicly reported numbers for sites it does not monitor, then uses a formula to fill in the rest.

While the raw numbers are interesting, what makes them compelling is to see how they reflect a shift in consumers’ buying behavior. The rise of e-commerce has been accompanied by a decline in catalog sales. From 2000 to 2001, the Commerce Department reports that e-commerce sales were up by $6.24 billion while catalog sales were down by $7 billion. From 2001 to 2002, e-commerce sales were up $8.87 billion and catalog sales down $1.63 billion. The shrinkage in catalog sales accelerated last year, with e-commerce sales up an estimated $12.2 billion and catalog sales down an estimated $5.9 billion. E-commerce sales as a proportion of remote sales-that is, combined e-commerce/mail-order sales-grew from 25.7% in 2000 to 31.6% in 2001, 37.2% in 2002 and 45.3% in 2003.

In addition, the number of catalog shoppers has declined the past two years by 20 million, while the number of at-home online purchasers has risen nearly 28 million, reports the American Interactive Consumer Survey from The Dieringer Research Group.

Because the growth in e-commerce sales outstripped the shrink in catalog sales, another conclusion to be drawn from those numbers is that store shopping is shifting to the web. The magnitude was only a matter of $5.9 billion in 2003, so no one believes any more-as many did in 1999 and 2000-that store retailing is in danger. Nonetheless, the shift underscores the importance to retailers of having a multi-channel strategy. “There’s nothing to suggest that that momentum will decelerate,” says Jim Okamura, partner with retailing consultants J.C. Williams Group. “If you’re a national retailer or a regional retailer of any size, consumers are expecting you to have multiple channels that they can buy from, not just browse in.”

A big impact

Furthermore, the reports of dollar volume of online sales ignore the by now well known phenomenon of the web influencing offline purchases. Dieringer’s American Interactive Consumer Survey reports that the web influences $1.50 in offline sales for every $1 spent online. In that case, the web is responsible for $110 million in offline retail sales. When Dieringer wraps travel sales into the equation, it estimates that online research affects $137.6 billion in offline sales, meaning the total effect of online shopping is $230 billion in retail and travel sales.

Tom Miller, senior consultant with Dieringer, says that ratio has held steady over the nearly 10 years that Dieringer has conducted its study. “Anybody doing hard numbers like comScore is creating the right benchmark for online sales,” Miller says. “But if all you’re doing is counting clicks, you’re missing something with a big impact on retail.”

kurt@verticalwebmedia.com

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