Online Retail Sales Build, Poised For Record Holiday Season
There were $13.29 billion in online retail sales in the three months ending Sept. 30, up 27 percent from the same period in 2002. Every three months, the U.S. Department of Commerce releases a measure of online retail sales, which includes goods and services where a retail order but not necessarily a payment is placed over the Internet. But the Commerce Department's data doesn't include travel, a major category in online transactions, nor financial services.
The $13.29 billion represented 1.5 percent of total retail sales, compared to the third quarter of 2002 when it was 1.3 percent ($10.46 billion). Total retail sales in the third quarter were estimated at $872.5 billion, up 6.1 percent from the same period a year ago.
Independent analysts had predicted growth between 20 percent and 30 percent.
Ross Rubin, senior analyst at eMarketer, said Friday afternoon that there's been pretty healthy double-digit year-over-year growth in online retail sales. It's dominated by a lot of traditional retailers, who are becoming adept in sales and returns not only in the traditional brick-and-mortar stores but also online. An exception would be Amazon.com, which recently passed the $100 million mark in online sales, but it's also become a more generalized retailer and not just the books and CDs that it started offering back in the 1990s.
Rubin and other analysts think there's plenty of room for growth but he doesn't think that online will ever replace traditional retail sales. There are several large retail categories, such as groceries, that will never be sold well online.
"The percentage [of retail sales] is relatively low but I think most retailers these days are not looking at the online channel strictly as a standalone business," Rubin said. "They're looking at it partly as a tool that can drive in-store traffic. They've been developing better integration between those two channels with in-store pickup and in-store returns."
Rubin said traditional retailers have been working hard to build integrated systems that make it easier for them to return products offline if they don't like them. He said that customers are driven by price but that's not the whole story.
"They're also very driven by convenience. The notion that you're going to have to ship something back if it's unsatisfactory could be a big barrier," Rubin said. He said that a couple of years ago, it was rare to find stores that accepted in-store returns of items purchased online. Today, it's hard to find stores that don't, including Sears, Wal-Mart, the Sharper Image, Staples, Bed, Bath and Beyond and others.
"You want to be where your customer is," Rubin said.
Doug Schwegman, director of customer and market intelligence of CyberSource Corp., said there's a chance that online retail sales could see year-over-year growth of 30 percent between 2002 and 2003.
"It is still a small percentage of total retail sales at 1.5 percent, so there is plenty of room for continued strong growth in online sales over the next few years as consumers get more comfortable with shopping online and as merchants get better at online selling," Schwegman said.