Behind the Numbers: Off the Rack, Off the Charts

• by Lynn Russo , June 27, 2006

Apparel leads the extra-large growth of online retail

For my wedding in May, I needed a lot of stuff: a dress, shoes, wedding party gifts, honeymoon outfits. I did some shopping locally, but increasingly found myself coming home from the mall empty-handed and turning to the Web for items I couldn't find  and for things I never thought I would buy online but did, like my wedding dress. Just a few years ago, my experience would have been atypical; today, it's becoming the norm.

The surge in online shopping and spending has largely been led by the apparel sector, according to eMarketer. U.S. Dept. of Commerce figures show that u.s. retail e-commerce grew 24.6 percent in 2005, compared to just 7.2 percent growth for all retail sales. Tools such as virtual models with the ability to enlarge images, zoom in on items from various angles, and change colors or design are helping to satisfy the desire to touch and try on clothing.

"There's a core group of people who are spending quite a bit of money buying apparel online sight unseen, and they have enough influence to drive the market," says Jeff Grau, senior analyst at eMarketer. "And apparel boutiques both from the U.S. and from overseas  bigdropnyc.com, bio-nyc.com, and scoopnyc.com  are offering designer clothes through exclusive agreements that can't be found anywhere else."

Even such large retail chains as Wal-Mart, Saks Fifth Avenue, and Nieman Marcus are rolling out Web-only product lines to lure shoppers to their sites, the report points out. Some, such as Amazon, JC Penney, Nordstrom, and Wal-Mart are using streaming video ads and fashion content to in-crease visitors' interest, according to InternetRetailer.com.

Grau also notes that online shoppers are becoming more sophisticated and comfortable with making purchases, partly because Web retailers are making returns easier and customer service is getting better, which helps lessen consumer resistance.

Also, consumers are diversifying online spending to include big-ticket items such as appliances and exercise equipment, and luxury goods such as designer apparel and jewelry. Affluent shoppers have helped drive the increase in sales for the last two years, according to the Ernst & Young Consumer Trends Center.

According to eMarketer estimates, retail e-commerce sales will increase an average of 18.6 percent per year between 2005 and 2009. The number of online shoppers will reach 133 million by 2009, up from 118 million in 2005, according to u.s. Dept. of Commerce figures. Average annual spending will equal $1,512 by 2009, compared with $877 in 2005.

Apparel and accessories were ranked as the categories enjoying the most growth in 2005 (41 percent), according to comScore Networks Inc., followed by computer software with 37 percent, and toys and hobbies with 35 percent. The flowers/greeting cards/gifts category saw the least amount of online growth.

Areas where we'll see the greatest growth over the next five years, according to InternetRetailer, are apparel and accessories (23.1 percent); drugs, health, and beauty (19.5); housewares/home furnishings (11.2); and computers and electronics (10.8) percent.