Retailers shift their ad spending from TV, radio and print ads to digital ads.
After years of rocket-like growth, online retailers’ optimism stays high
Now that the U.S. web retailing market is entering its second decade of continued growth, Internet merchants of all types, including chains, catalogers, web-only retailers and brand name manufacturers, are more than just bullish on their prospects for expansion.
An Internet Retailer web-based survey on the future of web retailing reveals that 35.5% of 268 merchants and others who responded believe that their e-commerce revenues this year will grow by at least 35%. 8% forecast an increase of 25% or higher. Another 30% expect revenue growth of 15% to 25% and 16.8% anticipate annual web sales to rise 10-15%. Only 9.5% of retailers surveyed expect annual revenues this year to grow by less than 10%, clearly a sign of the bullish prospects that retailers hold about the market.
The survey was e-mailed in early May to all subscribers of IRNewsLink, Internet Retailer’s e-mail newsletter, and responses were collected and analyzed using web survey technology from WebSurveyor, which has partnered with Internet Retailer on a series of monthly surveys of the e-retailing industry. The results clearly demonstrate that most merchants see e-commerce remaining on a strong upward curve.
As a category, chain retailers were among the latecomers to business-to-consumer e-commerce. But the latest Internet Retailer survey indicates that chain retailers, backed by their significant technology, merchandising and distribution resources, see the web as a major sales engine moving forward-and accounting for a greater overall portion of their total revenues. When asked where they expect their online sales to be in five years, 21.7% of chain retailers indicated that they expected web sales to be 100-200% higher, 18.8% expect web sales to be 50-100% larger, 20.3% of chains expect sales to be 25-50% bigger by 2010, and 18.8% anticipate an increase ranging from 10% to 25%.
Across the board, online retailers are optimistic about near-term prospects as well. 23.2% of chain retailers expect their e-commerce revenue to increase more than 30% in the next 12 months and another 20.3% anticipate growth between 10% and 15%. In comparison, 22.2% of catalog companies expect web sales growth to exceed 30% in the coming year, as do 50% of web-only merchants and 44.1% of consumer brand manufacturers.
Today the web accounts for about 5% of total annual U.S. retail sales. But respondents to the survey indicate that Internet sales as a part of all retail sales will become much larger. Nearly a quarter-23.8%-expect the web will account for 20% or more of all retail sales in five years. Another 25.3% expect e-commerce will account for 15% to 20% of total retail sales within five years and nearly a third-31%-forecast 10-15%. Those expecting the web’s influence to be more modest are in the minority-17.6% expect the web to account for 5-10% of all retail sales in five years and a mere 2.3% expect the proportion to stay the same as today.
When broken down by web merchant category, the survey reveals different expectations about long-term growth. For instance, the largest number of chains (37.7%) and catalogers (37%) believe that Internet will account for 10-15% of total sales in 2010. In contrast, 63% of web-only merchants believe the web will account for more than 15% of retail sales by 2010. Brand manufacturers are the most optimistic with just less than three-fourths-73.6%-believing the web will account for 10-15% of all sales in five years.
Overall, the survey indicates that web retailers are anticipating that their customers will be spending considerably more time and money shopping online. Yet the future landscape of web retailing is also undergoing dramatic change and merchants will have to respond to a number of market trends to keep up with shoppers and their ever more demanding expectations.
A key fact that helped to establish web retailing as a new merchandising channel-and a trend that will continue to drive growth-is the time savings and convenience that shoppers expect from e-retailing. That will continue to drive sales, retailers expect. 38.2% of respondents to the survey rate the continued growth in demand for time-saving convenient services as the biggest reason customers will keep shopping online.
34.8% of chain retailers in the survey indicate that time savings and making web sites even easier and more convenient to shop will be the biggest consumer trend accounting for growth. That compares with 44.1% of consumer brand manufacturers, 29.6% of catalogers and 37% of web-only merchants.
Internet Retailer’s latest survey confirms that web technology is rapidly evolving from personal computers and dial-up Internet access to a future where shoppers will use a broad-band connection and cheaper-but more powerful-PCs and hand-held devices to purchase consumer goods over the web. Overall, 42% of respondents indicated that broadband access to the Internet from home would be the biggest technology impacting the future of web retailing. 30.9% of all respondents also rated the improvement of all forms of web retailing hardware, software and database applications as having a significant impact going forward. 13.4% of those surveyed rated improved payment applications as making a difference.
No more separation
Asked which shopping category holds the best potential for sales growth, a plurality of respondents in every category chose apparel: 23.1% of all respondents, 20.6% of chain retailers, 40% of catalogers, 18.9% of web-only merchants and 32.3% of consumer brand manufacturers.
A decade ago, when the business-to-consumer e-commerce market was still embryonic, many retailers saw the web as a stand-alone venue and even as a separate organization or business unit. But as the web retailing market continues to evolve, the Internet Retailer survey demonstrates that future success for retailers depends on how well they use the web to identify and convert multi-channel sales. For instance, 42% of chain retailers believe that e-retailing will have the biggest single impact on multi-channel retailing going forward, compared with 33.3% of catalogers, 36.1% of web-only merchants and 50% of consumer brand manufacturers.
The Internet Retailer survey demonstrates the rapid forthcoming advance of ways to shop online. 40.6% of chain retailers indicate that interactive TV will be a part of their e-commerce strategy within 5 years, compared to 42.3% of catalogers, 40% of web-only merchants and 50% of consumer brand manufacturers. l