Internet sales to reach new heights
'CHA-CHING ... CHA-CHING," the cash register din that rings as merrily for holiday retailers as jingle bells, is losing out this season to a subtler sound: "CLICK ... CLICK."
Wielding computer mice, consumers this holiday season will buy retail items online like never before, fueling hyper-growth in electronic commerce, say online analysts.
Since 1996 online shopping revenue in the United States has surged nearly 10-fold to $7 billion. By 2002 it will jump to $41 billion and outstrip traditional catalog marketing within a decade, according to Jupiter Communications in New York. (See chart, bottom, right.)
Moreover, 43 percent of US computer users will shop on the Internet this season, a 330 percent rise from last year, when just 10 percent bought online, according to a recent survey by Dell Computer Corporation and Louis Harris & Associates Inc.
"Explosive is probably the word that comes to mind," says Ken Cassar, a Jupiter analyst. "It never ceases to surprise me how quickly individual merchants are growing and how quickly the markets are growing," he says.
"Internet commerce will reshape the global economy," says George Colony, president of Forrester Research, Inc. in Cambridge, Mass.
Forrester estimates that worldwide "iCommerce sales," or online trade in goods and services among businesses and between businesses and consumers, will reach as high as $3.2 trillion in 2003, or 5 percent of all global sales.
Retailers' merriest months - November and December - are especially vital for those eager to coax more consumer dollars online. The two months this year will rack up $2.3 billion in sales, more than double last year's tally and 32 percent of this year's Internet purchases, says Jupiter.
The swelling cyberspace population, now estimated at 90 million worldwide, apparently finds the convenience of Internet shopping irresistible. They can log on from their home computer at any time of day or night, shop at their own pace, and expect delivery to their door within a few days.
But the rapid growth in online retail is rubbing up against some obstacles. Existing phone lines can hardly cope with current levels of digital traffic. Many consumers fear floating their credit card numbers into cyberspace despite encryption. Shipping costs keep prices high. And Internet retailers must cut prices more to convince shoppers they are getting a better deal than in brick-and-mortar stores, analysts say.
Still, some raw numbers suggest companies that avoid cyberspace will lose big.
Digital traffic doubles every 100 days; the online bookstore Amazon.com saw its 1997 sales jump more than 825 percent over the prior year; and online sales by the Internet network firm Cisco Systems Inc. logged $3.2 billion last year, or 32 times more than in 1996.