Forrester Expects Strong E-Commerce Growth Through 2010

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Though the growth of new households shopping online will slow over the next five years, consumers will continue to drive strong annual sales gains to the tune of $210 billion by 2010, Forrester Research said yesterday.


A new report from Forrester predicts that online sales will enjoy a 14 percent compound annual growth rate over the next five years. Excluding travel, sales will grow from nearly $110 billion this year to $210 billion in 2010. Also, in 2005, online sales will reach a milestone when general merchandise sales top $100 billion for the first time.


However, with nearly two-thirds of wired North American households having already made a purchase online, little room is left for growth, Forrester noted. Still, it expects consumers to continue to drive sales for several reasons. The average Web buyer earns more than the average American, is more likely to have a college degree and is more likely to have bought items in the past three months across all product categories online and offline.


Also, e-commerce has become part of consumers' lives. For example, 65 percent of North American online households have researched a product online. Online consumers also continue to diversify their shopping-related activities: 42 percent have e-mailed a customer service inquiry; 33 percent have tracked a package; 28 percent have searched for free offers and coupons; and 22 percent visit comparison-shopping engines.


Finally, consumers who shop online are likely to stay loyal to this channel. According to Forrester, 55 percent of consumers who shop online say they like the ability to find products online that they can't find offline. Forty-eight percent prefer that Web stores have no closing hours, and 47 percent say online shopping is faster than offline shopping.


The overall growth of online sales will come at the expense of offline sales as catalogers, in particular, aggressively introduce buyers to the benefits of the Web, according to the report. As a result, online retail, excluding travel, will account for 9 percent of total retail sales in 2010.


Most product categories are predicted to benefit, but some could more so than others. According to Forrester, the standouts are: apparel, which will see sales grow from $12.5 billion in 2005 to $25.9 billion in 2010; health/beauty, with sales jumping from $2.9 billion to $7.8 billion; home products, with sales reaching $40.6 billion from $19.1 billion; and food/beverage products, with sales topping $16.9 billion from $5.8 billion.


On the marketing side, several trends will support the growth:


· Pure plays such as Amazon.com, Drugstore.com and Bluenile.com will continue to innovate their sites to compete for shoppers.


· More manufacturers will launch e-commerce sites once they absorb information such as that 27 percent of Web buyers have purchased from a manufacturer site. Manufacturers also lead the charge on custom product initiatives such as Nike's ID program and Timberland's custom-boot program.


· With one-quarter of online consumers having discovered auction sites, consumers now expect to be able to find used, slightly damaged or overstocked items online. This has spawned businesses such as Overstock.com and forced retailers to launch their own outlet e-commerce initiatives. Commodities such as electronics and home products will benefit from this trend.


· Multichannel retailers are helping introduce online shopping to the holdouts by offering the ability to buy online and pick up in the stores, bringing kiosks into the stores and using the Web as a test market for new product lines.


Chantal Todé covers catalog and retail news and BTB marketing for DM News and DM News.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters


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