Byline: Valerie Seckler

CHICAGO — Sinking Internet stock valuations. A rising tide of failures among business-to-consumer dot-coms. Consolidations.
But it’s not all chaos in the world of e-commerce. The Internet is driving far more sales transactions off-line than on the Web.
On Thursday, Jupiter Communications disclosed fresh research at its fourth annual online shopping forum, projecting U.S. consumers will spend more than $632 billion in off-line channels in 2005, as a direct result of browsing the Web. That dwarfs the $199 billion that Internet consultant Jupiter estimates those shoppers will spend online five years from now.
“For every dollar spent online this year, eight dollars will be spent off line, driven by the Web,” said Ken Cassar, a senior analyst who tracks the retail sector at Jupiter. “Skeptical retailers eyeing fluctuations in the financial market and the increasing failure rates of Internet companies are often blind to the most important issue — the degree to which their online efforts will affect their off-line business.”
With that in mind, Jupiter forecasts U.S. consumers will spend $29 billion online this year, while shelling out $236 billion in off-line purchases driven by the Web. According to Cassar, that $29 billion will account for roughly 0.6 percent of U.S. consumer spending in 2000.
Cassar made the lead presentation, “Online Retail: New Channel or New Paradigm?” at the Jupiter forum, held here at the Sheraton Hotel and Towers.
By comparision, the $199 billion Jupiter projects U.S. consumers will spend online in 2005 would account for approximately 6 percent of U.S. retail sales.
Further, Jupiter anticipates that Internet users will drive around 75 percent of total retail spending — both online and offline — five years from now, up from 43 percent in 1999.
“We think that every gain made by traditional retailers and manufacturers on the Web will hurt other traditional companies,” Cassar advised. “We do not see a lot of incremental sales growth online.”
“Multichannel retailers — and I would argue that every retailer should be multichannel — must capitalize on both online and off-line opportunities, in order to take full advantage of the Web,” Cassar continued. “Sadly, few of the retailers we’ve surveyed are integrating their channels, or making plans to do so. Only 21 percent said they are currently tracking their customers across various channels.”
Many businesses see their online efforts as separate and distinct from their traditional channels, but Jupiter has found Internet shoppers are more fluid, often choosing to do business with a company across its multiple channels.
A recent survey conducted by Jupiter and NFO, a market research firm, showed that more than 68 percent of people who have made purchases on the Internet have also researched products online, and then purchased them at a brick-and-mortar store; 47 percent of the Net buyers also have bought items on the phone after browsing them online.
“Evaluating the Web solely on the volume of online transactions severely undervalues the Internet,” Cassar concluded.