Online Retail Spending to Soar

More than 17 million households will shop online by the end of 1999, according to Forrester Research, driving US online retail sales for the year to $20.2 billion.

Although Forrester expects online retail sales to continue to soar over the next five years, it also expects the number of online shoppers in the US to level off at around 50 million households. This trend will be offset by a steady increase in average online spending per household, growing from $1,167 in 1999 to $3,738 in 2004 as consumers shift from the convenience and researched items that constitute the bulk of online purchases now, to replenishment purchases like groceries. In 2004, Forrester expects 49 million US households to spend more than $184 billion online for a variety of goods.

Forrester also predicts a surge in e-commerce later in the next decade, as today’s Generation Y consumers start to enter their prime earning years.

By 2004, Forrester also predicts the emergence of a new type of retailer called the post-Web retailer. Post-Web retailers will use detailed knowledge about a target customer segment to sell all the relevant products and services that a segment demands. By centralizing all the available information about shoppers — purchase history, direct mail responses, and Web store click-stream data — retailers will be able to identify their most profitable customer segments.

E-Commerce Predictions
Households shopping online 1999 2004
17m 49m
Online retail sales $20.2b $184b
Spending per household $1,167 $3,738
Source: Forrester Research

“Post-Web retailers will need to do more than just sell everything to anyone,” said Seema Williams, consumer e-commerce analyst at Forrester. “To succeed, they must anticipate customer demand, expand their product and service offerings into adjacent categories, and simultaneously sell through multiple retail channels, including stores, catalogs, call centers, Web sites, interactive TV, and mobile devices. None of today’s merchants are prepared for post-Web retail.”

According to Forrester, the greatest challenge facing post-Web retailers will be finding the right balance between product categories offered and customer segments served.

“Consolidation will reshape the post-Web retail landscape as merchants expand into complementary product categories,” Williams said. “Meanwhile, consumer data will become the measure for all retail business decisions, from product launches to company mergers. The post-Web winners will be brand-name merchants with a strong offline infrastructure and the ability to establish an online retail gateway.”

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