U.S. E-commerce to See Significant Growth by 2008

A report from Forrester Research, Inc. finds that a growing online consumer base, increases in new product categories, and efforts by online retailers to optimize online shopping experiences will spark significant growth in the industry over the next five years.

The report also states that, although offline retail sales continue to struggle, e-commerce sales will increase at a steady 19 percent year-over-year growth rate, rising to 229.0 billion in 2008 from $95.7 billion in 2003. Online retail sales will account for 10 percent of total U.S. retail sales by 2008.

Forrester predicts that nearly 5 million new U.S. households will shop online in each of the next five years, with the total number of U.S. online shopping households expected to reach 63 million by 2008. According to the report, a growing number of these households use broadband, resulting in the ability to research more products and shop online more than dial-up users. As further proof that online consumers are maturing and growing more comfortable with the medium, Scarborough Research announced a study that shows American adults with at-home broadband connections accounted for almost one-third (31 percent) of all consumer online spending last year, totaling 15 billion dollars.

The study also revealed that America’s 23 million broadband users are twice as likely as all Internet users to have spent $2,500 or more online in the past 12 months. Representing a more affluent market, broadband users are 39 percent more likely to purchase jewelry online; 64 percent more likely to purchase toys and games online; and 64 percent more likely to purchase cars, trucks and SUVs.

Product categories that historically have seen insignificant online growth are predicted to grow the fastest, according to Forrester. For the next five years, food and beverage, sporting goods, and home goods will outpace more traditional online categories like books and travel. Books, which generated 14 percent of U.S. e-commerce sales in 2000, will fall to 3 percent of total sales over the next five years.

Online grocers like Peapod and FreshDirect will continue to make strides, as Forrester projects the most dramatic growth will be seen in the food and beverage category, with sales increasing to $17.4 billion from $3.7 billion over the next five years. Sporting goods, which have found a niche in the used goods market, are predicted to grow to $6 billion from $1.7 billion, with nearly a third of sales coming from used products.

“Although we’ve seen e-commerce growth begin to slow over the past several years, online retail continues to grow and mature,” said Carrie Johnson, senior analyst at Forrester. “We are seeing considerable growth with products that have taken longer to gain traction with consumers. Today, online shoppers are doing more than buying books and securing travel plans.”

As online consumers’ shopping preferences and technological proficiency evolve, online retailers will invest more heavily in site design and usability testing in an effort to create optimal shopping experiences for their customers.

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