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E-commerce sales to boom for next 5 years

Forecasts project online sales of $215B to $335B annually by 2012

By Linda Rosencrance
February 5, 2008 12:00 PM ET

Computerworld - Online retail sales in the U.S. are expected to grow about $20 billion to $30 billion each year for the next five years, reaching somewhere between $215 billion and $335 billion by 2012, according to two recently released reports on e-commerce.

In 2007, non-travel-related e-commerce sales reached $175 billion, a 21% increase over the previous year, according to Forrester Research Inc. In its report, titled "U.S. E-Commerce Forecast: 2008 to 2012," Forrester predicts that online retail sales will reach $204 billion in 2008, $235.4 billion in 2009, $267.8 billion in 2010, $301 billion in 2011, and $334.7 billion in 2012.

JupiterResearch LLC offered lower figures in its report, "U.S. Online Retail Forecast, 2007-2012." According to Jupiter, non-travel-related e-commerce sales were $128 billion in 2007, up from $108 billion in 2006, and will grow to $148 billion in 2008, $166 billion in 2009, $182 billion in 2010, $199 billion in 2011, and $215 billion in 2012.

"E-commerce continues its double-digit year-over-year growth rate, in part because sales are shifting away from stores and in part because online shoppers are less sensitive to adverse economic conditions than the average U.S. consumer," Forrester analyst Sucharita Mulpuru said in the Forrester report.

Despite the projected growth, Mulpuru said online retailers face challenges. For example, most shoppers still prefer physical stores, online retail is becoming more seasonal, and online shoppers don't spend time browsing on Web sites.

But, there is also good news, she said. According to Forrester, 88% of U.S. online consumers say that they have bought something online in the past and online shopping is growing faster than shopping in physical stores. Retail sales at physical stores are expected to grow at an annual rate of 2.6% from 2007 to 2012, while online sales are expected to grow approximately 14% annually for the same period, Forrester's report said. According to the Jupiter report, e-commerce will grow at an annual rate of 15%.

Moreover, online retail sites don't suffer as much as brick-and-mortar stores during economic downturns, because online shoppers tend to have more money than those who shop in physical stores, the Forrester report said.

To increase online sales, retailers should focus on improving the consumer's overall online experience by addressing the seasonal nature of retail and taking steps to make their Web sites more conducive to browsing, the Forrester report said.

"Consumers do exhibit loyal behavior to the channel, provided that retailers are able to meet and exceed customer expectations," Mulpuru said. "By focusing more energy on accurate product information, improved imagery/photography, and flexibility in payments and returns, and by reducing the hurdles of shipping costs, online retailers can go a long way in currying favor with shoppers.

Patti Freeman Evans, the lead analyst on the Jupiter report, said that although individual retailers see value in the many technologies that are gaining traction, such as dynamic targeting and social shopping, none of these offerings are likely to have a major effect on the overall online retail market in the coming years.

"It is more likely that such technologies will provide benefits in the form of cost efficiencies, increased targeting capability and customer retention," she said.

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