November 15, 2001, 12:00 AM

Auctions gaining on retailers` online market share, Forrester reports

Online auctions will reach $48.5 billion in five years, representing 25% of online sales by 2006. Auctions account for 10% of online sales today.

Online auctions will generate some $48.5 billion in sales in 2006, representing about one quarter of all online sales and coming to represent traditional retail’s biggest competition online, according to new research from Forrester Research Inc. Auctions were closing 10% of all sales online when the research firm surveyed 10,000 online consumers this summer.

So far, only about 27% of online consumers have participated in auctions on the web, leaving plenty of room for growth, and that’s just what Forrester is predicting. Most veteran auction users say they’ll participate in online auctions again, and 14% of online consumers surveyed by Forrester say they expect to try auctions for the first time this year. Given the return of experienced auction buyers and the influx of new ones, “we expect auction sales to grow at the rate of 68% through next year and then level off to steady average growth of 41%,” says Forrester analyst Carrie Johnson.

However, traditional multi-channel merchants and manufacturers selling online will feel the pinch of online auctions to different degrees, depending on their category, pricing, and supply and demand, says Johnson. Auctions for flowers, for example, will generate less than 1% of online retail, while bidding on furniture will constitute 23% of category sales in 2006. Traditional retail sales online of electronics and toys will be hardest hit by auctions’ growing clout, says Forrester.

Instead of seeing online auctions as a threat, traditional retailers selling online should use them to their advantage, Forrester says, pointing out that among other things, auctions can be an effective means of clearing merchandise. “Instead of worrying that auctions will sully their brands, retailers should use auctions – consumers already buy and sell Bose speakers and Chanel couture on eBay,” Johnson says.


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