E-Commerce Continues to Drive Business
N E W Y O R K, Aug. 21 -- The average consumer may not want to buy groceries online from Web sites such as the now-defunct Webvan.com.
But that doesn't discount the value of buying books, electronics, clothing or a birthday present for your niece online.
Now that many of the harebrained schemes and weaker players have been driven out of business, e-commerce has finally begun to find a comfortable spot in the retailing sector.
According to a report by retail consultancy Retail Forward, the top 50 e-retailers had aggregate sales of $14 billion in 2001, which accounts for 40 percent of total online retail sales.
Forty-two of the top 50 companies were multichannel businesses — companies that have a strong presence both on the Web and in brick-and-mortar stores and/or catalogs.
Although several online retailers closed their operations in 2001, total online retail sales grew to $36 billion, representing 1 percent of total retail sales. Retail Forward expects that figure to grow to 2.5 percent, or $110 billion, by 2006.
Online Incentives
Amazon.com led all e-retailers with $3.1 billion in sales last year. With incentives like "Free Super Saver Shipping," which eliminates shipping costs on orders over $49, Amazon maintained top-line growth.
Amazon recently announced second-quarter sales of $806 million, a 21 percent gain from the year-ago period.
Analysts expect 2002 to be the turning point for Amazon, with profits of 5 cents per share from sales of $3.7 billion. Going into 2003, analysts forecast earnings of 22 cents per share and sales of $4.2 billion.
According to Mary Brett Whitfield, director of the Retail Forward E-Retail Intelligence Program, multichannel players are able to leverage their brand with their online presence.
For example, Gap doesn't offer maternity or petite clothes in its stores but makes them available online.
Offline Assets
Inversely, an online presence can also promote sales at traditional retail stores. According to Whitfield, 40 percent of Best Buy's in-store sales are influenced by its online presence.
