BOSTON – The second decade of eCommerce will be marked by innovations that will make online shopping easier and more engaging, twin factors that will nearly double US online retail sales to $329 billion in 2010, a new study shows.
This heady growth rate, some 14 percent compound annually, will be fueled by retailers who are investing profits in emerging technologies, such as sophisticated analytics and personalization tools that enhance the online experience for existing customers, predicted Forrester Research. The result: Businesses no longer view the Web as a low-cost sales channel but as a way of improving customer service and retention.
The $329 billion represents a minor downward adjustment from Forrester’s 2004 forecast of $331 billion for 2010. This is due to recent softness in overall consumer spending.
“Businesses are debating their online strategy,?? said Forrester Research Vice President Carrie Johnson. ?Now they’re looking at their Web sites as a way to drive in-store traffic and increase their engagement with customers. This is a huge shift in philosophy as eCommerce enters a more sophisticated phase. But it’s also creating tension as CEOs demand ROI for expensive Web sites with hard-to-define metrics such as loyalty and brand.”
Companies that illustrate this new philosophy include Target, which is using its Web site to promote and brand its retail stores; Gap, which is launching redesigned Web sites that ease the check-out process; and Nike and Timberland, two manufacturers that are exposing online shoppers to the idea of product customization. All are being forced to become more innovative online because pure plays such as Amazon.com, drugstore.com, Blue Nile, and Newegg.com have raised the customer experience bar.
Travel remains the largest online retail category, growing from $63 billion in 2005 to $119 billion in 2010.
General merchandise (all retail categories excluding auto, food and beverage, and travel) will top $100 billion for the first time in 2005.
An increase in the number of women shoppers will contribute to 14 percent of jewelry sales moving online by 2010. Online sales of health and beauty products will grow at an annual rate of 22 percent.
Twenty-nine percent of small appliance sales will migrate online by the end of the decade as a generation that grew up with Internet access begins to get married and attend weddings.
Categories showing significant growth (growth above the overall 14 percent compound annual rate) include: apparel, consumer electronics, health and beauty, home products, food and beverage, and sporting goods.
