Forrester: E-Commerce Sales in Multichannel World Surged 22% to $172B in 2005

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NEW YORK - E-commerce accounted for $172 billion in 2005 sales, or 7.7 percent of overall retail sales with travel or 5.5 percent when excluding that sector.

But Forrester Research vice president and research director Carrie Johnson thought it was the right time yesterday to say loudly to online retail: Rest in peace. She preferred to call her National Retail Federation presentation the state of multichannel retailing.

"Folks are immeasurably mainstream and multichannel," Johnson said. "Retailers no longer treat the channel as separate, for the most part."

In fact, the most profitable retailers have more than one channel - something known for some time, but now a confirmed fact.

According to Forrester, catalog-based retailers reported a 32 percent operating margin, store-based 27 percent and Web-based only 21 percent. The same numbers for 2003, respectively, were 28 percent for catalog, 21 percent for store-based and 15 percent for Web.

Even in terms of positive operating margins, 92 percent of catalog-based retailers reported that fact versus 70 percent for store-based and 64 percent for Web-based.

E-commerce Up, Up, Up

That said, online sales continue their upward trajectory.

Forrester estimates e-commerce last year grew 22 percent from $141 billion in 2004, with projections of $198 billion in 2006, $228 billion in 2007, $258 billion in 2008 and $288 billion in 2009. By 2010 e-commerce will have accounted for $316 billion in sales, or 13 percent of overall retail sales.

Nearly 40 percent of the U.S. population now shops online, Johnson said. But the same percentage has researched a product online and bought it offline, influencing more than $100 billion in offline sales each year.

Women dominate online shopping and the education level is falling, reflecting the offline world.

"It isn't that early adopter male," Johnson said.

The average income of online shoppers - in the low $60,000s - is still higher than offline shoppers, but it fell from the mid-$80,000s just a couple of years ago, she said.

Still, multichannel shoppers prefer face-to-face interactions. Johnson said they are most satisfied with in-store customer service and least with the telephone. And here's the surprising statistic: 83 percent of online shoppers prefer to shop in stores, according to Forrester.

So retailers have to respond by redefining strategies, Johnson said. There's practically no such thing as a single channel retailer anymore. Some retailers have launched catalogs, others who were online have opened physical stores.

Not surprisingly, retailers are reassessing the role of the Web. The channel may be about service or about research. It's not just about transactions and driving stores sales, making this the biggest shift in the last couple of years.

"Retailers are starting to think about the channel for branding," Johnson said. "There's a dramatic shift in people's thinking [and] budgets."

Such use of the Web to build a brand or generate loyalty, as well as the push toward multichannel retail, has forced many retailers to evaluate organizational structures. Some have introduced the Internet into marketing for segmentation and customer-centricity purposes.

Target Corp., for example, has a site dedicated to its branding messages, including television commercials and promotions. Macy's, which can also be accessed from, targets young consumers with shopping opportunities as well as promotions.

However, crafting the multichannel message and experience needs careful planning and coordination, Johnson said. Which raises another key issue: measurement of success online, already impossible, makes matters worse.

"Now adding branding and loyalty, measurement becomes much more difficult," Johnson said.


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