New Survey Optimistic About Online Retail

Computergram International, Nov 19, 1998

After polling over 120 web-based retail companies, the Boston Consulting Group has calculated that full year 1998 online revenues for retailers in North America will be over $13bn. That amount is substantially higher than previous estimates of around $9m maximum for the year. For the first six months of 1998, revenues were $4.4bn, still less than 1% of overall US retail revenues.

Boston carried out the work for shop.org, the online retailers association. It used data from the online retailers sampled, rather than base its projections on the behavior of consumers or a limited number of businesses. Nevertheless, the report is sponsored by the industry itself, and doesn't emphasize the current lack of profits among online retailers. Despite its continued growth rates in the 300% range, online retail leader Amazon.com is still posting heavy and growing losses, and isn't expected to break into profit until some time in the next century. The range of goods sold by the sampled companies included clothing, computer goods, food and wine, home and garden products, gifts, entertainments and services. Growth rates are in excess of 200% per year, says the report, with the top ten publicly listed online traders showing year-on-year revenue growth in excess of 160%. Revenue- per-order is also increasing. But only 5% of unique visitors to a web site become customers, and only 1.6% of visits result in a purchase. Only a small improvement in conversion rates translates to "dramatic increases in revenues" the report says. And online investors are having to reinvest 65% of their revenues into marketing and advertising, compared with 4% for most traditional stores. The ten largest stores accounted for half the overall revenues, with computer goods, entertainment, travel and discount brokerage accounting for 80% of the online retail market. The founding chairman of shop.org, Cliff Sharples, who is also the president and CEO of online retailer Garden Escape Inc, claimed the report proved that "the underlying economics and growth of online retail are sustainable."