April 30, 2002, 12:00 AM

BOOM: The sound of e-retailing numbers exploding

The boom in e-retailing is reviving. BizRate.com reports online sales were up 41% in Q1 vs. Q1 2001 and comScore Networks reports they were up 30%.

Last year, all the numbers indicated that e-retailing was entering a mature phase. Year-over-year growth was below the hot pace of prior years. And the general malaise about the Internet had led many people to predict the industry would experience a tapering off of growth.

But the pace picked up in the last quarter of last year. And since the first of this year, online shopping has been on a tear: Up 41% in sales vs. last year and 34% in orders, reports BizRate.com Inc., which monitors traffic at 2,000 sites where it has contracts to measure customer satisfaction. And up 30% over Q1 2001, according to comScore Networks Inc., which tracks a cross-section of the 1.5 million consumers who have given it permission to track their behavior on the web. “We are not seeing a maturing of the market at all,” says Chuck Davis, CEO of BizRate, which also operates an online comparison shopping service. “We are on a 10-year ramp.”

In the first three months of the year, consumers spent $11.6 billion online, 41% higher than the $8.22 billion they spent in last year’s first quarter, BizRate says. They placed 91.5 million orders, up 34% from 68.3 million in the same period last year. The average ticket increased 5% to $127.08 from $120.76. Meanwhile, comScore says online consumer purchases excluding travel reached $10.1 billion in Q1 vs. $7.8 billion in Q1 2001 and $10.8 billion in Q4, only a 7% decline from last year’s peak shopping period.

In comparison, overall retail sales were up about 6.4% in the first quarter-still very strong and ahead of expectations but nowhere near the online growth rate. “This is like the technology boom that went on for so long,” Davis says. “But now it’s the e-commerce boom.” Both BizRate and comScore track merchandise sales and do not include travel spending in their numbers. ComScore includes event tickets while BizRate does not.

At this time last year, e-shopping had grown 16.9% year-to-date over the prior year, says BizRate. Davis attributes the strong increase this year to a number of factors. For one thing, he says, after Sept. 11, more consumers stayed home. They learned to use the Internet for shopping, had a positive experience, as the reports of strong on-time fulfillment rates indicate, and thus became comfortable doing even more of their shopping online, he says. “These customers became loyal to the power of shopping online,” Davis says.

Contributing to that loyalty to online shopping, he says, is the ease of comparison shopping online, which erodes loyalty to a retailer. Evidence that more consumers are comparison shopping before they buy online comes from the significant increase in percentage of consumers who shopped at a retail site for the first time during last year’s holiday shopping season, Davis says. In 2001, 71% of consumers shopped at new sites, up 11% from the previous year’s 64%-the first time that number increased year-over-year, Davis says.

Further contributing to stronger retail sales was the explosion in travel spending, which may have brought new shoppers online who then tried shopping other sites, says Daniel E. Hess, vice president of comScore. Travel spending was up 87% in the first quarter to $6.97 billion from the first quarter of 2001, comScore reports. “We could be seeing a nice halo effect, to the degree that people who were making those travel purchases were making their first online purchases, then going over to retail sites,” Hess says.

Among the strongest growth categories are sports and fitness sales, which were up 145% vs. Q1 last year and 14% vs. Q4, and health and beauty, which were up 44% vs. Q1 2001 and 8% vs. Q4, comScore reports. “The timing of growth in some categories is noteworthy as retailers lay out their strategies for the coming year,” Hess says. “Retail generally has a natural decline from the fourth quarter, but some categories don’t.”

Davis and Hess expect the growth so far to continue through the year. If it does, online sales in 2002 will reach $40.5 billion, according to BizRate’s calculations, and $43.8 billion, according to comScore. “We`ve seen no sign of a slowdown,” Hess says. “From the data we`ve seen so far, everything is green lights from now until the end of the year.”

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