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Online Sales And Profits Surged In 2003, Study Shows

6/07/2004 02:00:00 AM Eastern

Fueled by e-tail sales of computer hardware and software, total online purchases rocketed 51 percent to $114 billion last year, representing 5.4 percent of all retail sales.

Last year also marked an even more compelling milepost, as e-tailers sailed passed the break-even point first attained in 2002 to post collective operating margins of 21 percent in 2003, thanks to better-contained marketing costs.

The solid results come by way of The State of Retailing Online 7.0, an annual study of 150 retailers conducted by Shop.org, a division of the National Retail Federation (NRF), and Forrester Research.

Computer hardware and software accounted for $11.0 billion in online revenue in 2003 and could add another $1 billion in 2004. By contrast, online CE sales hit $5.7 billion last year and are projected to reach $7.5 billion in 2004. Total online retail sales are expected to grow 27 percent to $144 billion in 2004, Shop.org said, representing 6.6 of total retail revenue.

Retailers are helping to fuel the growth by integrating and cross-promoting their online and off-line stores. For example, 87 percent of retailers now accept in-store returns of online purchases, 77 percent collect customers' e-mail addresses at their stores (up from 57 percent in 2002), and clerks at 55 percent of retailers are able to place customers' online orders from their store.

Retailers noted that 24 percent of off-line sales were influenced by the Web last year — up from 15 percent in 2002 — and that one in four consumers will make a purchase when returning an item they bought online.

"We are beginning to see retailers crack the code of maximizing each channel," said Shop.org's executive director Scott Silverman.

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