Internet Retailing Expected to Hit $13 Billion in Revenue

Internet retailing, while still in an emerging state, is growing in excess of 200% per year, and 1998 online revenues will surpass $13 billion, according to a study by and the Boston Consulting Group. The study, called “The State of Online Retailing,” polled 127 online retailers in seven categories.

According to the study, online revenues generated by North American-based retailers for the first six months of 1998 were $4.4 billion — less than 1 percent of overall retail revenue in North America.

The study found that the growth in traffic has been rapid, and revenue-per-order is increasing. Still, only 5 percent of unique visitors to sites become customers, and only 1.6 percent of visits result in purchases.

Despite the escalating number of retailers selling online, the study found that the revenues are still concentrated in a few mature sites. The study found that the 10 largest sites surveyed account for 50 percent of revenues. The top 10 publicly traded online retailers have experienced year-over-year revenue growth in excess of 160 percent.

The study also found that multichannel retailers, such as Dell Computer, Charles Schwab, Eddie Bauer, and Lands End, account for 59 percent of all revenue. Multichannel retailers also experience better conversion rates and more customer loyalty.

Online retailers are also investing heavily to expand their reach and customer base. The companies surveyed reinvest 65 percent of their revenue in marketing and advertising, compared with 4 percent for most traditional stores. The study found that online retailers’ marketing and advertising costs per order generated is $26, compared with $2.50 for traditional stores.

eMarketer’s eCommerce: Retail Shopping Report predicted earlier in November that retail revenue generated from online shopping worldwide will increase by 784 percent over the next four years, from $4.5 billion by year-end 1998, to $35.3 billion by 2002. To see the CyberAtlas item on eMarketer’s report, click here.

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