February 26, 2009, 12:00 AM

Cover Story: What’s Next

(Page 3 of 3)

With geographic location technology combined with mobile phone operating systems and wider use of the Silverlight imaging platform, for example, the typical new-age shopper could soon have another attraction pulling at her attention. Recognizing that the shopper browsing its web site is near one of its retail stores, a merchant could send an offer to her phone and when she arrives at the store she would see a bigger-than-life projection on the store window of the same product information flashed on her phone screen. “I would be astonished if that is not commonplace in 10 years and within five years at more progressive retailers,” Fargiano says.

If what the shopper sees in the store window stirs her emotions to buy, she may decide to purchase it immediately in the store or through her phone, or first check with her social networks and her bevy of friends and preferred merchants. Technology gives her plenty of options, and the retailer with the strongest emotional tie will likely win the sale.


Crunching the numbers

U.S. online retail sales are projected to grow nearly 11% this year to $156.1 billion, representing 6% of total sales, up from $141.3 billion and 5% of sales in 2008, according to a report last month from Forrester Research Inc.

Although e-commerce growth rates over the next several years will run between 8% and 13%, far lower than the 25% increases of past years, the web will continue to take share from stores, says Vikram Sehgal, research director at Forrester. “Of the U.S. Internet population, about 75% buy online, so there’s not much room to grow from new buyers coming online,” he says. “But there will still be a lot of growth from wallet shift.”

Forrester bases its projections on data compiled from consumers and retailers. Forrester several times a year questions a panel of about 60,000 consumers on such topics as the number of product categories they purchase online and their annual online spending. Forrester also surveys online retailers for information such as average order values and the number of product categories ordered from suppliers. “We balance all that data together,” Sehgal says.

One of the indicators of rising online sales, he adds, is that the average consumer now buys five product categories online every year, up from 4.2 five years ago, though not necessarily the same categories each year.

New technologies also are driving more sales online. In 2007, for example, Forrester projected tepid sales of Amazon.com’s new Kindle e-book reader. But Amazon sold out of the Kindle during the 2007 and 2008 holiday shopping seasons, and Amazon CEO Jeff Bezos says Kindle customers still buy the same number of physical books online while purchasing about 1.6 e-books for every conventional book. Forrester now projects e-book sales could hit $100 million this year and surpass sales of physical books by 2012.

Another source of growth is in global online sales. In its most recent global online survey, Nielsen Online projected that about 40% of the world’s population, or 875 million consumers, shopped online last year, up from 10%, or 627 million, in 2006.

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