Sunday, November 21, 1999

Novelty stage past, but e-commerce just a slice of retail

The Cincinnati Enquirer

        About 100 years ago, a good number of Americans were pooh-poohing a newfangled form of retail that seemed frivolous and risky: the Sears, Roebuck & Co. mail-in catalog. And it became huge.

        Relate this bit of history to the Internet, and it becomes easier to understand how online spending has become a major retail force today, worth billions of dollars. And e-commerce is expected to continue to grow, exponentially.

        This doesn't mean that Internet shopping will replace traditional store shopping — total retail spending is growing every year and online receipts represents just a sliver of it. But estimates for annual and holiday spending this year indicate online shopping has passed the novelty stage and established itself as a lifestyle choice, if not enhancement.

        “I love to shop. There's nothing I like better than going into a store,” said online shopper Linda Effer, 59, of Blue Ash. “But when you're my age with kids all over the country, it's so easy.

        “I am so tickled at what they (online stores) do.”

        Internet spending is expected to reach $20.2 billion this year, compared with $8 billion in 1998, according to market research firm Forrester Research Inc. in Cambridge, Mass. In 1997, total annual spending reached less than $3 billion.

        Internet analysts and retail experts expect millions of people to shop online for the first time this year. Interviews with several Tristate consumers, such as Ms. Effer, show many shoppers are fine-tuning the online shopping they began experimenting with last holiday season.

        “Last year, the numbers shot up higher than anybody expected,” said Bernadette Tierman, New Jersey-based author of the recently released book E-tailing: Profits for the E-commerce Explosion.

        “As the people got their feet wet last year and maybe ordered a few things online, if they were successful, all bets are on that they will really buckle down and sit at that computer and do a major portion of that (holiday) shopping.”

        Researchers are agreeing with Ms. Tierman. In the fourth quarter of 1999, American consumers are expected to spend $8 billion online — the total of 1998 — and $1.5 billion between Thanksgiving and Christmas, Forrester predicts.

        In 2000, the year-long projection is $38.8 billion.

        It seems like a lot of money, but not when compared with total annual retail sales. According to the National Retail Federation, the nation's leading retail trade group, total retail spending is expected to reach $2.8 trillion this year.

        To also put it in perspective, consider that sales at Wal-Mart alone totaled $137.6 billion in 1998. That's more than three times the online 2000 prediction.

        But what is significant is that online retail figures are growing at a rate that is faster than total retail, and the product is improving at a similar rate. As more people get online, the Internet becomes more attractive to other retailers — such as Neiman Marcus, Crate and Barrel and Pottery Barn. Meanwhile, e-stores are fine-tuning their delivery systems and service.

        The value of the online shopping mall is better than last year, said Seema Williams, an e-commerce analyst for Forrester.

        Perhaps, but retail experts say it's not likely the virtual mall will ever overtake the real deal.

        As Scott Krugman, spokesman for the National Retail Federation, put it: “The Internet is great, but it doesn't have a food court or a multiplex.”


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