Bulls Run for E-retailing in New Report
Even as e-retailing struggles to regain favor with Wall Street, online sales
will soar 85% with year, according to a new study by the Boston Consulting
Group and e-retail trade group Shop.org. The report foresees Internet
retailing becoming a $61.1 billion market in 2000, up from $33.1 billion it
tallied for 1999. "Online retailing is here to stay," says David Pecaut,
senior vice president and global co-leader of the e-commerce practice at
Boston Consulting Group.
Though the report finds that 65% of shopping carts are abandoned online, it
shows some improvement in the number of browsers who become buyers. The
average order conversion rate (orders vs. visits) rose from 1.5% in 1998 to
1.8% in 1999, while the buyer conversion rate (buyers vs. visitors) increased
from 2.8% to 3.2% over the same period. Pecaut called these improvements
significant steps toward profitability for Web merchants. On that front, 38% of e-retailers overall report they're the black, according to the Boston Consulting Group and Shop.org. Catalogers with Web stores are faring even better, with 72% saying they're making money on those operations.
As online retailing builds market share category by category, traditional
retailers remain threatened, adds James Vogtle, director of the consulting
firm's e-commerce research. He notes that online merchants already represent
18% of computer hardware and software sales and 8.5% of book sales "after just
two years of build out." Continued growth in these and other categories online
will cause brick-and-mortar retailers to decrease the size and SKU counts of their stores, Vogtle says.
Despite the brighter news, the report also points out some rough spots,
including a 15% increase in customer acquisition costs among Internet
merchants. The 1999 average stood at $38 per customer overall and $82 per
customer for pureplay e-retailers. As a percentage of revenue, the latter
group spends 10 times as much on marketing as do multichannel retailers.
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