Internet sales are expected to be a bright spot in an otherwise down economy, according to a report released today by the National Retail Federation.
This story first appeared in the April 8, 2008 issue of WWD. Subscribe Today.
“We think what is happening is a shift in buying from offline to online,” said Scott Silverman, executive director of NRF’s online retail group shop.org. That shift is continuing despite the economy, he said.
The Internet is likely to attract two kinds of shoppers: Those who prize convenience above all and aren’t as affected by prices, and those who are hunting for bargains.
Any retailer, whether store or catalogue based, who has made investments in the online channel will benefit from the shift, said Silverman. Retailers that aren’t online will have it “that much worse.”
Total online sales in the U.S. are projected to reach $204 billion this year, up from $174.5 billion in 2007. (Figures do not include travel.) Apparel, accessories and footwear made up the number-one category last year with $22.7 billion in sales. Total sales are expected to reach $334.7 billion by 2012.
Silverman said he does not know when online sales will top out, but said he doesn’t expect the Internet to do away with brick-and-mortar stores, as some predicted in the early days of e-commerce. “No one can reproduce the experience of shopping in a store and the social aspects of it,” he said.
Online apparel sales have room for growth, as only 10 percent of all apparel, accessories and footwear sales took place online last year. That figure is expected to rise to 12 percent this year. By contrast, 45 percent of sales of computer hardware, software and peripherals took place online last year, and that figure is expected to rise to 48 percent this year. Overall, 6 percent of all sales took place online last year, and this year that figure is expected to rise one percentage point to 7 percent. Groceries were the least likely category to be purchased online, with only 1 percent of all grocery sales taking place on the Web last year, a level that is expected to remain the same this year.
Paid search and e-mail continue to be the two most important types of Internet marketing. Retailers report that 35 percent of new customers come via search engines. Emerging media such as banner ads on social networks and small sites, blogs, message boards, and online videos are popular, with 21 to 26 percent of retailers reporting they have used them, and 65 to 67 percent saying they plan to use them in 2008.
E-mail marketing continues to be the most cost-effective method of reaching customers, averaging just under $7 per order. The cost per order for banner ads on social network sites was $50, the same as placing a banner ad on a portal. Forrester Research Inc. conducted the survey.