August 30, 2004, 12:00 AM

Forrester’s forecast: Full speed ahead

As more households go online and as more retailers improve their web site with shopping innovations, online retail merchandise sales will more than double in six years to $316 billion, Forrester Research reports.

What do more households going online and more retailer innovations and site improvements mean for online retail? According to Forrester Research, it all sums up to a 14% compound annual growth rate in online retail between 2004 and 2010. In six years, online sales will more than double to a projected $316 billion from the $144 billion forecast for this year. The figures, from Forrester`s recently-released "U.S. eCommerce Overview: 2004 to 2010," include, besides merchandise, totals for online ticket sales, $4.3 billion this year and a projected $9.4 billion in 2010; and travel, $52.4 billion this year and a projected $119.1 billion in 2010.

Forrester analyst Carrie Johnson notes that most categories will grow, on average, at a 10% to 20% CAGR over the next six years, but that average will be exceeded by a number of what she terms "late-blooming" product categories slated to gain in online sales only as consumers` general comfort with online shopping increases. Tools and hardware, for example, will see about $1.3 billion in online sales this year, but that`s projected to soar to $8.6 billion in 2010, when online sales will account for 5% of all sales in the category. Another big gainer is likely to be online sales of garden supplies: this year`s estimated $1.4 billion in sales is expected to enjoy a CAGR of 24% over the next six years, reaching an annual total of $5.3 billion by 2010, when that will account for 8% of all retail sales in the category.

Home products, already the largest category of merchandise purchased online, is projected to stay on top. Consumers will buy an estimated $15.4 billion online in merchandise for the home this year and will be buying an estimated $43.3 billion there by 2010--that will be 8% of all category sales. Apparel, at $11.7 billion this year the third largest category of merchandise purchased online, is projected to edge up to the number two spot with online sales of $28.4 billion in 2010, representing about 12% of all apparel sales.

Computer hardware and software, with $12 billion in online sales this year, is expected to reach $17.4 billion in online sales by 2010, dropping to the number three spot behind apparel. More hardware and software will be purchased online versus through other channels--54%--than in any other product category.

In the report, Johnson predicts "better multi-channel cooperation and bigger budgets for multi-channel integration and technology development" within organizations, with successful integration having the double effect of boosting sales both online and offline. Also expected to help drive growth in online sales over the next six years are continually-improving shopping tools designed to enhance the customer experience and new marketing tactics, such as the use of product links in blogs, and other forms of more targeted, contextual advertising.


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