Internet-based shopping reached $141.4 billion during 2004, a 23.8% jump from 2003’s level. Excluding travel sales, online retail sales also rose 23.8%, to $89 billion, or 4.6% of total retail sales.
The medium is not yet done growing. According to Forrester Research and Shop.org, which surveyed online retailers regarding changes in online shopping, women are increasingly accepting the online channel, and will contribute to a forecast rise to $172.4 billion in online sales. The biggest growth categories will include cosmetics and fragrances, jewelry and luxury goods and flowers, cards and gifts.
Search engine marketing is another catalyst for increased fortune. Retailers reported that SEM generated 43% of the customers to their sites. Eighty-seven percent used paid search payment, and they spent twice as much from their marketing budgets on this channel as they did in 2003.
Online sales are increasingly profitable, as well. During 2004, online sales reported operating margins of 28%, up from 21% a year earlier. Catalog-based retailers saw their margins rise from 28% to 32% during the same period.
Retailers are acknowledging the margins by touting the channel in their promotions: Ninety two percent include URLs on their in-store promotional material, up from 77% a year ago. Forty five percent permit consumers to purchase and redeem gift cards both online and in stores, up from 30% a year earlier. And nearly one fourth offer consumers the ability to check in-store availability from their Web sites.
Overall, the Internet is claiming an increasing portion of total retail sales among certain product categories. It currently accounts for nearly half of computer hardware and software sales, more than one quarter of tickets and travel purchases, and 20% of books sold.
