• September 22, 2005
  • By Colin Beasty, (former) Associate Editor, CRM Magazine

Online Retail Sales Won't Stop Growing

Online retail sales will grow from $172 billion in 2005 to $329 billion in 2010, according to a new Forrester Research report, "US e-Commerce: 2005 to 2010: A Five-Year Forecast and Analysis of U.S. Online Retail Sales." Online sales will maintain a 14 percent compound annual growth rate (CAGR) over the next five years, the report states. This forecasted growth is preceded by a milestone for the online retail industry: 2005 marks the first year in its 10-year history that sales will top the $100 billion mark. "Both consumers and sellers continue to stroke the e-commerce fires," says Carrie Johnson, a Forrester analyst and author of the report. "As consumers increase shopping-related activities and sellers compete to innovate and keep [consumers] engaged, online sales will enjoy solid growth over the next five years." In addition, Forrester found that e-commerce will account for 13 percent of total retail sales. With the rise of online shopping by women, certain verticals can expect to see higher percentages: 14 percent of jewelry category sales and 29 percent of small appliance sales will take place online by 2010. Overall, Johnson expects online growth to slow between 2005 and 2010, but says consumer purchasing trends will continue to push up the numbers. Web buyers will continue to out-earn and outspend nonbuyers. Compared with the average American consumer, the average Web buyer earns more (with a household income of roughly $68,000 versus $52,000 for all consumers), are more likely to have a college degree, and are more likely to have purchased an item in the past three months across all product categories, according to the report. In addition, online shopping activities turn those searching for products into buyers more than offline shopping does. "The Web makes many specific shopping-related activities easier than before," Johnson says. "Online activities become routine for consumers and that ultimately leads to a purchase." Online retailer sellers have an important customer loyalty advantage over their offline-shopping counterparts: convenience. "Convenience is a dynamic that unlike low prices and deals, will always give the Web a leg up over stores and keep customers loyal to the channel," Johnson says. When asked why they shop online, 55 percent of approximately 1,000 consumers say they like the ability to find the products online that they can't find offline. Forty-eight percent cited that Web stores never close and 47 percent say it is faster than offline shopping. As for the retailers, Johnson says a combination of innovation, selling tactics, and targeting strategies is essential for them to stay ahead of the competition. Enhanced product content from manufacturers to keep consumers informed, the increased popularity of auction purchasing and the ability of retailers to enable multichannel purchasing, or to buy online and pick up in stores, are examples of innovative tactics that continue to drive sales. "As all types of sellers compete for the wallets of online shoppers, they're going to force each other to respond to innovation and alter their approach to online sales," Johnson says. "This rising tide has floated all boats and has resulted in an online environment that now fosters innovation and growth that ultimately benefits the consumer." Related articles: The Value of Online Events in Marketing Programs (Part 1)
The Value of Online Events in Marketing Programs (Part 2) An SMB Must: Market on the Internet
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