Online Retail Revenues to Reach $200 Billion

Online retail is expected to hit $211.4 billion in 2006, a 20 percent gain over revenues of $176.4 last year. That’s according to “The 2006 State of Retailing Online,” the ninth annual report published by Shop.org and conducted by Forrester Research.

The forecast $211.4 billion includes travel, a category valued with revenues of $73.4 billion in 2006. The top non-travel categories include computer hardware and software ($16.8 billion); autos and auto parts ($15.9 billion); and apparel, accessories and footwear ($13.8 billion). Cosmetics and fragrances ($800 million) and pet supplies ($500 million) are expected to experience over 30 percent growth in 2006, more than any other categories. Pet supplies is a new category tracked in this year’s report.

Integration between online and offline activity is key for retailers who report 22 percent of offline sales are influenced by the Web. Retail Web sites are also a viable channel to reach new customers; 38 percent of online customers are first-time buyers.

The study finds the Internet can serve as a means of window shopping. Consumers compare prices, find gift ideas and research products. Some of the resulting sales are transacted offline. To integrate the experience online and offline, 79 percent of retailers have instituted consistent pricing across channels, and 46 percent allow for customers to buy and redeem gift cards on the Web site as well as at brick-and-mortar locations. Thirty-three percent of retailers have loyalty programs to retain customers, and 26 percent offer in-store product availability information online.

Payment over a secure channel remains an important task. Sixty-three percent of retailers surveyed require card verification value (CVV) codes at checkout. Private-label cards are accepted by 25 percent of retailers. Twelve percent of online retailers offer third-party email payment options, and nine percent accept eChecks. A further seven percent offer third-party credit accounts.

Data in the report are derived from sales data reported from 174 surveyed retailers and publicly available earnings statements. Forecast figures for 2006 are estimated based on the percentage of individual product categories that will move online and compared against a list of top online retailers by category.