Online Retail Thriving: 8% Growth Expected This Holiday Season
Yesterday we reviewed the past decade in online retailing. Today we look at some forward-looking statistics about e-commerce. In particular we analyze the upcoming holiday season and how online retailers can expect to fare.
Amazon.com was founded in 1995, but it famously didn't make its first annual profit until 2003. Those days of struggle for e-commerce vendors are long gone. In its State Of Retailing Online 2009 report, Forrester Research reported that the vast majority of Web retailers were not only profitable in 2008 - in a recession - but also that their overall level of profitability grew.
The e-commerce market is expanding, due to a combination of factors. One is that consumers are no longer afraid to buy things online, as they once were. Also brick-and-mortar businesses are migrating more of their operations online. We also have technology advances to thank: better recommendations technology, social media, the emergence of mobile commerce.
E-commerce Continues to Grow, Despite Economy
E-commerce has ridden the ups and downs of the general economy over the past decade, but it has continued to grow throughout. In the State Of Retailing Online 2009 report, Forrester Research reported that retailers saw their Web divisions grow by 18% in 2008. Given that Forrester described 2008 as "one of the worst years ever" in retail, that's significant growth in online retail activity.
Holiday Season Predicted to Grow 8%
Online shopping has always been a seasonal market and there are promising signs for the upcoming holiday season. The latest comScore statistics show that toy web sites grew 9% in October, which comScore claimed was due to some parents getting in early for holiday gifts. The retail apparel segment also grew by 9% in October.
Overall, Forrester Research predicts that online holiday retail sales (over November and December) will grow 8% this year to $44.7 billion.
Brick-and-Mortar Stores a Success on the Web
A noticeable trend over the past decade has been the slow but steady flight of 'brick-and-mortar' retail stores to the Web. In the early days of online retailing, Web operations were typically isolated from the main sales channels. But nowadays, Forrester notes that Web operations are a strategic part of the entire organization.
Two recent stories from industry website Internet Retailer show how traditional retailers are not only adapting online, but thriving. Best Buy's traffic has grown 18% over the past 12 months according to Nielsen Online. Meanwhile for the quarter ended October 31, 2009, Gap's Web sales increased 4.9% to $298 million. The web accounted for 8.3% of sales at Gap in Q3 09, compared to 8.0% in Q3 2008.
Forrester outlined a number of reasons why online channels are appealing during a "challenging" economy - including enabling consumers to find products online that they can't find elsewhere, offering comparisons on product features and pricing, avoding holiday crowds and more.
All of this data is very encouraging to online retailers. Even during a down economy, the Web has come through for most of them. Web entrepreneurs, if you're looking for opportunities then look no further than online retailing!
Photo credit: Sⓘndy
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That's positive motivation to current and upcoming e-commerce retailers alike. I couldn't have guessed the numbers. It is a pleasant surprise to see the stats.
I find it interesting to realize that Forrester's reported estimate of holidays sales growth in 2008 (+5%) is substantially higehr than the Dept of Commerce reported number of -5%. Wouldn't this suggest that Forrester's prediction of an 8% growth rate this holiday season is similarly too optimistic. Is the issue perhaps that the retailers who choose to respond to the Forrester survey are biased towards retailers who are doing well? After all, if you're having a tough time of it, wouldn't you be hesitant to even mention it to an independent third party?
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