Online Sales Expected To Explode Despite E-tailer Woes

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CAMBRIDGE, MASS. -Despite the growing number of e-tail casualties and consolidations-including, within the CE space,, Everything For Less, and Value America-analysts are already predicting another robust year for online merchants.

Though guesstimates of expected Web-derived revenue vary wildly, leading consultancies, Forrester Research and Gartner Group all agree that the e-commerce channel will continue to gain significant ground during the final quarter of 2000 and beyond.

"Despite the fact that dot-com retailers have been dropping like flies all year, online retail is alive and well," observed Forrester senior analyst Evie Black Dykema. Indeed, the research group, based here, has revised its forecast upward by 16 percent for the year to $44.8 billion in U.S. sales.

According to a recent Forrester report, a key driver of e-commerce revenue is the "explosion" of Web-enabled devices-including game consoles, interactive TV and wireless products-which are "dramatically" changing consumer behavior. Their impact, argued Dykema, "is magnifying and rippling through retail, beyond the Net and into the brick & mortar world."

The report notes that while PCs will continue to be the primary entree to the Internet, funneling $246 billion in online sales by 2005, wireless devices and interactive TV will be the conduits for $23 billion in revenue that year.

All told, e-commerce revenue will reach $269 billion or 11 percent of all retail sales by 2005, Forrester predicts, and will influence another $378 billion in purchases, representing more than half a trillion dollars in overall spending.

Of that $269 billion, consumer electronics will contribute $13.9 billion by 2005, or a staggering 23 percent of all CE sales, while computer hardware will represent $19.3 billion, or 40 percent of all PC sales (see table above).

Besides increased Internet access, other e-commerce incentives include ease of shopping and sharper pricing, surmises, a Los Angeles-based Internet shopping portal and e-tail rating service. In a September survey of cyber shoppers, 73 percent cited "avoiding crowds" as the No. 1 reason to go shopping online this year, followed by the benefits of around-the-clock accessibility (64 percent) and saving money (37 percent).

Based on the survey results, BizRate predicts that computers will again be the top-selling segment for holiday purchases this year, with a projected $1.85 billion in sales-much of which will be transacted before December.

Meanwhile, San Jose, Calif.-based Gartner Group is betting that after all is said and done, the North American Internet retailing market will surpass the $29.3 billion mark this year, which would represent a 75 percent increase over last year's $16.8 billion online total.

Moreover, the firm predicts that online retailing will grow to about 5 percent to 7 percent of total retail sales in North America, up from less than 1 percent in 1999.

Leading the charge, Gartner said, are the computer hardware and software segments, as well as consumer electronics, which together will see sales grow from the $7.5 billion garnered last year to $59.7 billion by 2004.

Ironically, noted Robert Labatt, principal analyst for Gartner's e-business Services, "despite the size of this opportunity, the real story is that online electronics and computer retailers are operating at the thinnest of margins."

Labatt also warned that the waves of consolidation that have rocked the channel, and the recent scarcity of venture capital, are bound to continue.

His advice: Smaller niche players need to develop partnerships that drive revenue rather than press releases, and leading companies, whose strong consumer awareness and branding give them the upper hand, should partner with weaker players that have strong teams, technology or customer bases.

E-Commerce Sales Projections (In Millions of Dollars)








% total in 2005*

Major appliances








Consumer electronics








Computer hardware








*Percent of total multichannel sales for each category.

Source: Forrester Research, Cambridge, Mass.cTWICE 2000


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