Retail spending growth starts to slow for categories most mature online
Though categories less mature online continue to see major growth year over year, growth rates in categories already well-established online will decline, according to recent forecasts on retail spending by category from Jupiter Research Inc.
The largest online retail category tracked by Jupiter remains PCs and peripherals. With $9.7 billion in U.S. B2C online sales in 2002, Jupiter forecasts the category will represent $11.2 in sales in 2003. Apparel and footwear is now the second-largest category online, with sales of $6.4 billion in 2002 and sales of $7.1 billion forecast for this year.
Accounting for much of the growth in the apparel and footwear category is a shift from the catalog to the web channel, Jupiter senior analyst Ken Cassar tells Internet Retailer. “Retailers are allowing shoppers who receive catalogs to buy online and in many cases, encouraging it,” says Cassar. “We don’t believe the Internet is driving substantial incremental sales of apparel.”
Following apparel and footwear is the book category, which drove online sales of $2.8 billion last year and is projected to reach $3.1 billion this year; and software, which was $2.6 billion in 2002 and is projected to reach $2.9 billion this year.
Sales forecasts for other online categories included event tickets, $2.1 billion in 2002 and a projected $2.7 billion this year; prescription drugs, $1.3 billion last year and a projected $2.3 billion this year; office supplies at $1.1 billion and a projected $1.7 billion; and toys at $1.2 billion and $1.3 billion. Rounding out the top categories was jewelry, at $1.1 billion in 2002 and forecast at $1.3 billion in 2003, and housewares and small appliances, expected to make a big jump from online sales of $1.1 billion last year to $1.9 billion in 2002.
“We are starting to see a clear divide between growth rates in the more mature and the less mature categories,” Cassar says. “When you look at categories that are most mature like computers and books, you are looking at single digit growth rates year over year, whereas some categories that are less mature, like housewares, still have double-digit growth ahead of them.”
The expected growth rate of different categories based on tenure online has implications for future revenue and margins, Cassar adds. “As growth rates mature, retailers need to focus on items proportionally smaller than in the past,” he says. “For example, focusing on the efficiency of the warehouse and the cost of fulfillment might not matter all that much for a company that is still growing 100% a year, but for a company that is growing 10% a year, the potential savings are substantial.”
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