Online Consumer Sales Keep Increasing

US consumer e-commerce sales will reach $37 billion by year-end 2000, double from the previous year and will grow by a factor of 13 overall from 1998 to 2003, according to a report by eMarketer.

eMarketer’s report, “eCommerce: B2C Report,” also found that shoppers are buying online at increasing frequency and that e-retail spending will top $100 billion by 2003. The average US Internet buyer will purchase $627 worth of goods online in 2000, an increase from $500 in 1999. By 2003, that figure will increase to $1,033. The report also indicates that most Net shoppers log on with the intention of making a specific purchase and devote most of their effort to comparison-shopping.

“In a matter of months, shopping on the Web has matured from a small e-savvy few to a viable alternative for US consumers,” said Geoffrey Ramsey, Statsmaster at eMarketer. “The number of online browsers and purchasers has increased significantly since 1999 and Web commerce growth will continue to accelerate, beyond even previously aggressive expectations.”

A report from ActivMedia found the average e-commerce transaction by consumers who have been online more than five years is twice that of the newest to the Internet consumers; averaging $388 as compared with $187 for those online one year. While the ratio of dollars spent online vs. offline for similar goods purchased online in the past month remains constant at roughly $3 online-to-$1 offline, dollars spent online rises with time online.

According to ActivMedia’s “Capturing Online Markets: The Definitive Guide to Consumer Loyalty,” consumers who purchase Computers/Electronics (71 percent), Travel/Entertainment (71 percent), and Investments (71 percent) allocate the largest proportion of total spending for products to the online channel. These markets have had the longest time to mature online, and are also influenced by purchase criteria that lend themselves well to online comparison, evaluation, and acquisition. In contrast, buyers in Major markets allocate a slightly smaller portion (64 percent) of all their purchasing to online.

Average E-Commerce Transaction Size
By Year Started Using Internet
Year Came Online Average Transaction
1995 or earlier $388
1996 to 1997 $298
1998 to 1999 $187
Source: ActivMedia

More than 60 percent of consumers expect their online spending to increase over the next 12 months, according to ActivMedia. Another third (32 percent) expect that their spending will remain the same as it has in the past. Only a few (7 percent) expect their online spending to decrease. Among those shoppers who expect to increase their online spending in the next year, they expect an average increase of about 43 percent. For those few who expect a decrease, an average of a 69 percent decrease is expected.

ActivMedia also found that as time has progressed, the interval between going online and making a purchase has shortened dramatically. Shoppers who first went online to find information about purchases four or more years ago typically did not make an online purchase until they had been online an average of 22 months. In marked contrast, people who only went online recently (in the past year or so) waited an average of four months before making their first Internet purchase.

Other findings from eMarketer’s report include:

  • Travel-related services eclipsed computers as the largest online retail segment. Travel will account for $12.4 billion (33.5 percent) of the $37 billion total online retail sales in 2000. In 1999, travel and computers accounted for 61 percent of total online revenue. By 2003, they will compromise 39 percent of all consumer e-commerce dollars.
  • Unreliable online customer service is the leading barrier to consumer e-commerce success. Poor customer service was a major factor in the 32 percent of online shopping carts being abandoned prior to the completion of the transaction.
  • Teens will become powerful online shoppers. In 1999, just 37 percent of the 8.9 million Web teens had purchased online. By 2003, more than 80 percent of the 13.3 million teens online will have purchased on the Web–made possible by new payment methods. Teen online spending will reach $104 billion in 2003.
  • Many book and music e-tailers are diversifying product offerings and partnering with or acquiring other companies to from red to black.
  • In 2000, brick-and-mortar stores with an online presence will gain momentum and eventually dominate. Brands that can leverage their physical presence are poised to offer consumers the best of both worlds. Traditional stores such as Wal-Mart, JC Penney, Sears, and K-Mart can offer high levels of familiarity and trust, to reassure consumers.
  • Growth in online revenues continues to be at the expense of other traditional selling venues. The greatest migration is from catalog and phone orders.
  • Online gender parity is at its closest ever. Women will not achieve true parity participation on the Net until 2001-2002. By 2003, the number of women online will surpass 54 million, or 52 percent of total Internet users.
  • Senior citizens are rapidly becoming the second-largest customer base after minorities. Today, 16.4 million senior citizens are actively online in the US. By 2003, that number will grow to exceed 27 million seniors (or 43 percent of all US seniors).

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