A discussion draft of the Online Sales Tax Simplification Act of 2016 is expected to be introduced in Congress soon.
A summary of Internet Retailer`s annual ranking of the largest online retailers. This year`s numbers show that the 500 largest e-retailers account for 63% of all online sales.
Internet retailing has seen a decade of extraordinary growth. What’s more, during the past 10 years the web consistently has outperformed many multi-channel retailers’ store and catalog sales channels. Regardless, many retailers and industry analysts expected a softer year in 2005. After all, national economic indicators suggested shakier consumer confidence due to higher energy prices, a cutback in consumer spending brought about by a cooling housing market and overarching worries over the sporadic economy.
Expectations, however, were defied. Internet retailers matched sales growth in 2005 with that of 2004-to the number. According to The Internet Retailer Top 500 Guide to Retail Web Sites, 2005 was another year of 25% growth for the industry. Total business-to-consumer e-commerce sales reached $109.4 billion, 25% higher than 2004’s $87.5 billion, which was 25% more than 2003’s $70 billion.
The nation’s top 500 Internet retailers include a diverse mix of chain stores, catalogers, virtual merchants and consumer brand manufacturers. They led the way to higher online sales last year. The top 500 online retailers combined rang up sales of $68.9 billion in 2005-63% of all U.S. Internet-based sales. In comparison, the top 400 web retailers ranked by Internet Retailer in 2004 generated combined web sales of more than $51 billion, or 58.3% of all U.S. Internet sales.
Also, this year’s research finds two trends from 2004 continuing in 2005: higher average tickets and more traffic to the largest retail web sites.
Ranks and stats
The Top 500 Guide identifies the 500 largest retail web sites, ranking them by their 2005 sales. It also measures other key statistics for each e-commerce site, including monthly visits, monthly unique visitors, sales conversion rate and average ticket.
In 2005 the top 500 retailers recorded an estimated 523.9 million separate sales at an average ticket of $118. By comparison, 2004’s top 400 retail web sites had an estimated 401.5 million individual sales with an average ticket of $107. To present a true picture of average orders, this measurement eliminates sites with unusually high average orders; some furniture sites, for instance, have average orders of $1,350 and some computers/electronics sites have average orders of more than $400. When those higher value sites are factored in, the average ticket climbs to $167.
When web retailing began catching on in the mid- to late 1990s, right before the dot-com investment bubble burst in late 2000, many analysts predicted online shoppers-at the time mostly upper income, highly educated and computer literate men and women-would limit their spending to a few merchandise categories.
A decade later, Top 500 Guide research clearly shows the industry is diversifying its merchandising base, as evidenced by the fact that 11 major categories-apparel/accessories, books/CDs/DVDs, computers/electronics, flowers/gifts, food/drug, health/beauty, housewares/home furnishings, mass merchant/department store, office supplies, specialty/non-apparel and sporting goods-each generated more than $1 billion in their retailing segments.
Ten years ago, the books, CDs and DVDs category-consisting of items easy to pick, pack and ship-topped the list of categories generating the most web sales. Today the diversity of web retailing mirrors that of overall retailing, meaning most items consumers could once find only in a store or catalog now can be found online as well.
In 2005 mass merchant sites such as Amazon.com, Sears.com and others generated the most per-category sales. For the year, the mass merchant and department store category’s online sales totaled $18.3 billion, followed by: computers and electronics with $17.7 billion; office supplies with $10.3 billion; apparel and accessories with $7.1 billion; and books, CDs and DVDs with $2.5 billion.
Home improvement improves
Not too long ago, traditional merchants questioned what appetite their customers had, if any, for buying very small-ticket or fairly big-ticket items for the house and yard over the Internet. The Top 500 Guide, however, reveals that today hardware and home improvement is the web’s fastest growing sales category, increasing at an annual rate of about 50%.
For instance, a direct comparison between the 10 merchants ranked in the Internet Retailer Top 400 Guide to Retail Web Sites and those very same merchants in the Top 500 Guide reveals that year-over-year spending in the hardware and home improvement category increased 46.4% from $482 million in 2004 to $705.6 million in 2005.
The top merchant leading the hardware and home improvement category was The Home Depot Inc. (No. 41), with 2005 Internet Retailer estimated sales of $279.7 million, followed by Lowe’s Cos. Inc. (No. 69) with estimated web sales of $148.8 million. The category is growing because retailers are stocking multiple SKUs at prices that appeal to consumers. They’re also updating their web sites with more do-it-yourself content, ratings and reviews.
For example, Home Décor Inc. (No. 107), which operates multiple e-commerce sites focusing on different segments of the market, grew e-commerce sales 58.3% to $79 million from $49.9 million in 2004. Sales are up because Home Décor has been adding categories such as higher-end appliances, a merchandising segment that generated sales of $10 million, 13% of Home Décor’s total web sales.
Other product categories also posted impressive annual gains, particularly office supplies. Online office supplies sales for the same merchants ranked in both the Top 400 Guide and Top 500 Guide grew 60% from $6.4 billion in 2004 to $10.3 billion in 2005. The field was led by Office Depot Inc. (No. 2) and Staples Inc. (No. 3), each with 2005 web sales of $3.8 billion, and OfficeMax Inc. (No. 6), with e-commerce sales of $2.6 billion.
After office supplies, other online retail categories with fast-growing annual sales from 2004 to 2005 include: apparel and accessories, up 42% to $6.3 billion; books, CDs and DVDs, up 36% to $2.3 billion; mass merchandise, which increased 26.8% to $18.3 billion; food and drug, up 26% to $1.8 billion; and toys and hobbies, up 24% to $705 million.