February 1, 2007, 12:00 AM

Internet retailers: Set your sights higher

It’s time to look beyond this year’s Christmas trees to see just how far this e-commerce forest extends.

The flurry of fulfilling online orders for Christmas 2006 is over and the sales totals are in. Once again, for what seems the umpteenth year in a row, e-retail sales during the holidays grew at 26% while store-based sales grew at 4.4%, just slightly above the 2.5% inflation rate. As the market for web-based retailing has continued its rapid growth-to $102 billion for the year just ended-one might expect the growth rate to abate significantly. The same expectation applied at the outset of last year, and the year before and the year before that. But the 25% or better annual increases just keep coming, defying all expectations of a leveling of the growth curve.

It’s time, I think, to look beyond this year’s Christmas trees to see just how far this e-commerce forest extends. By now it is clear that e-retailing is not just another merchandising channel, the purpose of which is largely to supplant the traditional direct marketing channels of catalogs and 1-800 merchandising. Those channels never had this unbroken, decade-plus string of 25% or higher growth rates. They supplemented, but never really threatened, store sales growth in major categories in the manner that the online channel has in books and CDs, computer gear, office supplies, DVD rentals and flowers. There was never such a thing as Catalog Monday or Call Center Tuesday after Thanksgiving, and if there were it would not have captured the press attention or embedded itself into the public consciousness in the way CyberMonday has.

No, the impact-and the potential-of online retailing goes well beyond that of catalogs and call centers. It may very well be that the potential of this online business is a lot bigger than what even most retailers think. This revolution is powered by a rapidly changing retail market-by people who just don’t have time to shop the malls for Christmas gifts, by sophisticated shoppers who know they can find lots of things online faster than they can in stores, and by a growing number of computer-savvy consumers who are more comfortable shopping in front of computer screens than inside stores.

The monotony of 25% e-retail sales growth rates of Christmases past is telling all retailers to set their sights a lot higher as they look into the future of retailing on the web. The web is not bringing a refinement to retailing; it is powering the reinvention of retailing, which is the theme of our third annual Internet Retailer 2007 Conference & Exhibition at the San Jose Convention Center in June 4-7. See InternetRetailer.com/IR2007 for details on the world`s largest e-retailing show.

At that conference-and in the pages of future editions of this magazine-we will be asking whether you can envision a day when most Christmas shopping will be done online. Can you envision a day when women will routinely buy a dress on their iPhones while drinking a latte at Starbucks? Can you envision a day when major segments of retailing will be completely dominated by online merchants? Can you envision a day when large, store-based retail chains will remain competitive only by equipping their stores with all manner of online shopping tools-from web-based kiosks and POS terminals to web-linked price “tags” and marketing/entertainment/information screens? And can you envision the day when a prerequisite for rising to the CEO’s office of a major multi-channel chain will be a stint running the online unit? To all of these questions, we answer, “Yes, we can.”

Jack Love, Publisher

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