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Online Sales Soared 48% Last Year
May 15, 2003

Consumers bought more stuff online last year, a trend that will continue, according to a study by Forrester Research and Shop.org. The generally rosy numbers do show some weak spots, however, a fact that could spur some technology investment this year. The survey of 130 U.S. companies indicates consumers spent $76 billion shopping on-line in 2002. This represents a 48 percent increase over 2001, and projections for 2003 come close to $100 billion, representing 4.5 percent of total retail sales. Multi-channel retailers took a bigger slice of total online sales. In 2000 Web-based merchants had 46 percent compared to 54 percent for multi-channel sellers. Last year the pure play Web outlets captured only 28 percent and Forrester projects they will lose another three percent this year. One of the more telling stats was the shopping cart abandonment rate, which rose to 49 percent from 47 percent in 2001.

"Retailers have not done such a good job here," said Elaine Rubin, chairman of Shop.org., a division of the National Retail Federation in Washington. D.C. "Most of the focus has been on cutting costs, but this has to be the year of improving customer experience."

Scott Silverman, executive director of Shop.org., said he expects this will drive investment in usability software and better search engines this year. Multi-channel growth will also spur investment in inventory management software, according to Silverman. "Merchants will want to let consumers quickly check to see if an item is in stock at a local outlet. This may seem like a simple thing to a customer, but the technology to make it happen is quite complex and expensive." Software to look more deeply into the customer database could also be a hot item. "I see a lot of action here," said Rubin. "Online merchants need to understand their customers better. This means software to segment all that data for cross selling and up selling." The number is already being debated in analyst groups. A similar study by JupiterResearch found online retail at 40.4 billion in 2002 and 51.7 billion in 2003. Not reaching 100 billion until 2007. Jupiter's survey covered about 3,000 consumers and then interviewing all levels of companies in 31 categories.

"Our numbers are very much in line with what the Census Dept. shows," JupiterResearch analyst Vikram Seghal.

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