The economy may limp, but online retail sales will leap, bounding ahead by 10% annually through 2014, according to a new research brief from Forrester.
In the United States, online retail – excluding automotive, travel and prescription drug sales – grew by 11% during 2009, reaching $155.2 billion, or 6% of all retail sales, for the year. In 2010 online sales should amount to $172.9 billion, or 7% of all sales. And if Forrester’s projected 10% compounded annual growth rate holds, it would bring online sales up to $248.7 billion by 2014.
Why is Forrester so bullish on the Web, especially when the National Retail Federation anticipates an overall 2.5% growth rate for retailers this year? Forrester cited data from the North American Technographics Retail Online Survey which found 67% of online purchasers say they find products on the Web they can’t find anywhere else, while 65% feel they save time by shopping online and 63% believe they find better values and deals online.
And the overall Web-shopping audience is growing. According to Forrester, 154 million consumers bought online in 2009, representing 67% of the online population in the U.S. – and a 4% increase from the number of Web buyers in 2008.
But this is topline growth. What about the all-important metrics of income and margin?
“There will be downward pricing pressure for sure as there already has been, particularly in categories like books, media, consumer electronics, computer hardware, etc.,” Sucharita Mulpuru, VP and principal analyst for Forrester’s eBusiness (retail) practice told Direct Newsline.
But will margins fall? “Hard to tell,” Mulpuru added. “The most efficient retailers will thrive. That means figuring out a way to cut labor costs, make store inventory turn faster, which means big boxes need to start cutting the long tail, and ultimately reducing their real estate rents, which could happen when retailers negotiate hard in the depressed commercial real estate market, or they start moving into smaller spaces.”
Forrester offered predictions for a number of product categories. Consumer electronics, for instance, should continue to see double-digit growth as product comparison features, the ability to search for low prices, and the added value of product reviews make this category an “increasingly a good fit for the online channel”. Furthermore, the more-affluent online buying population will continue to buy e-goodies such as electronic book and magazine readers, smartphones, and accompanying accessories.
Online sales of apparel, accessories, and footwear saw a 17% growth over the prior year and are forecast as experiencing double-digit growth for the next few years. The growth is likely to be spurred by the younger and more-technically savvy nature of the online apparel customer, and will likely be helped by “broader retailer adoption of visual tools that mimic the tactile offline shopping experience”, according to Forrester.
So where will slowdown come?Online sales for PCs, software, and peripherals grew 7% over the previous year, totaling $27 billion in 2009. That said, “more than 90 million US households owned a PC by year-end 2008, indicating that future sales growth in this category will largely depend on technology advances and new devices like netbooks,” according to Forrester. Furthermore, “with Internet sales of PCs and software already surpassing 50% of total category sales, growth in this mature product category is expected to remain in the single digits.”
