In addition to growth in revenue, the figures compiled from the
study of 130 retailers show that US on-line retailers are
continuing their march to profitability. Last year, 70% of
retailers reported positive operating margins, compared with 56% in
2001. Collectively, retailers broke even in sales last year, up
from a loss of 6% in 2001.
"In a time when the retail industry has been extremely
challenged, it is encouraging to see the on-line channel continue
to grow, and even better, start to make money," said Kate Delhagen,
Consumer Markets Research Director, Forrester Research. "Last year
was about breaking even, 2003 is about generating profits."
On-line retail sales are expected to grow 26% in 2003 to $96
billion, with seven product categories poised for more than 40%
growth in 2003. According to the study, the continued growth of
on-line shopping was underscored by more product categories
reaching double-digit penetration of total retail sales.
Last year, 32% of computer hardware and software was sold
on-line. Other categories reaching double-digit penetration include
tickets for events (17%) and books (12%). In total, nine categories
will exceed 5% penetration this year compared with seven categories
in 2002.
On-line sales are expected to reach 4.5% of total retail sales
in 2003, up from 3.6% in 2002. The study also showed that 40% of
on-line customers are completely new to a retailer's entire
business.
"As multichannel retailers continue to fine-tune their on-line
selling and marketing strategies, consumers become more comfortable
shopping on-line with retailers they know and trust," said Elaine
Rubin, Chairman of Shop.org. "It took the catalogue industry 100
years to represent 4.7% of retail sales. It took on-line retailers
only six years to accomplish the same feat."
With tighter marketing budgets, retailers were forced to try to
do more with less last year. By shifting budgets away from
expensive portal deals to performance-based affiliate marketing and
search engine marketing, retailers were able to cut marketing costs
almost in half per order placed ($12 to $8), with store-based ($5)
and catalogue-based ($7) retailers most successful in this
endeavour. At $10, web-based retailers had the highest marketing
costs per order, but this is still a big savings compared with
previous years.
Retailers are investing in technology to improve the
multichannel customer experience. According to the study, most
retailers (63%) have upgraded inventory management systems to allow
for better management of the supply chain. An additional 40% offer
in-store inventory availability through their Web sites, and 78% of
retailers offer in-store returns of on-line purchases.
Nearly all of the multichannel retailers surveyed track customer
behavior for their brand. As a result of these efforts,
multichannel retailers reported that 46% of their on-line customers
also purchase offline, and conversely, 17% of their offline
customers purchase on-line. These multichannel customers have
proven to be more valuable and loyal to retailers. In addition to
direct on-line sales, these retailers reported that the Web
influences 15% of their offline sales.
"The growth of the on-line channel has ushered in a new era in
retailing, which makes shopping more accessible to consumers and
improves the overall shopping experience," said Scott Silverman,
Executive Director, Shop.org. "Consumers are embracing multichannel
retailing, and retailers are enjoying growth and increased loyalty
as a result."
