Business-to-consumer online sales in 2000 grew 66 percent to nearly $45 billion and are expected to grow another 45 percent this year to $65 billion, according to a study released yesterday.
About 40 percent of catalogers have been able to attract new customers through their online operations, the study found, resulting in about 72 percent of them showing an operating profit last year.
The study, called “The State of Online Retailing 4.0,” is an annual report released by Shop.org in conjunction with the Boston Consulting Group.
This year's report found that despite the dot-com shakeout, 43 percent of store-based retailers and 27 percent of Web-based retailers showed an operating profit in 2000. Overall, operating losses were $5.6 billion last year. Operating losses as a percentage of revenue decreased to 13 percent in 2000 from 19 percent in 1999.
The study noted that the move to profitability is partly a result of online retailers putting tighter controls on their marketing budgets. Customer acquisition costs for all retailers selling online fell to an average of $29 last year from $38 in 1999. Web-based retailers were able to reduce their acquisition costs to $55 in 2000 from $82 the previous year. The best-performing Web-based retailers were able to reduce their acquisition costs to an average of $14 per customer.
“Web-based retailers need to learn the basics of retailing,” said Peter Stanger, vice president and leader of Boston Consulting Group's business-to-consumer topic area in North America. “Store-based players are new to home delivery and selling to consumers one-on-one from a distance. Catalogers have a leg up on many dimensions but need to perfect ways to exploit the relationship marketing opportunities that the Internet enables and improve the consumer online experience.”
The study noted that travel, the largest online category at $13.8 billion in 2000, is expected to grow 50 percent this year. But as online retailing matures, other categories are expected to level off, with books stabilizing at 25 percent growth and computer hardware and software at 15 percent growth.
Shop.org, a division of the National Retail Federation, is an association of retailers whose membership includes online, offline, catalog-based and manufacturers selling directly to consumers.