US e-tailing sales to have brisk growth through 2010

U.S. residents will increase their online spending for retail products and services at a 12 percent annual average clip through the end of 2010, according to a Jupiter Research study.

Americans bought goods and services worth US$81 billion from online retailers in 2005, a figure expected to jump to US$95 billion in 2006 and to US$144 billion in 2010.

That, in Jupiter Research's view, is strong and healthy growth, and proof that the convenience of e-tailing will remain attractive. "This reinforces the strength and longevity of online shopping," said Patti Freeman Evans, a Jupiter Research analyst and author of the study, titled "U.S. Online Retail Forecast, 2005 to 2010."

What will change in the next five years is the dominant driver for online sales growth. Until now, growth has been fueled by the steady stream of new online shoppers. But that will change as the market matures, and growth is generated by existing buyers, she said.

Online retailers will need to adapt to this changed landscape by focusing on retaining their current customers through loyalty incentives and on luring away competitors' customers, because brand-new buyers will be harder and harder to come by. To thrive, e-tailers will need to increase what she calls their "wallet share" of existing shoppers. "Retailers are competing for the same pool of fish now," she said. "This heats up the competitive waters."

At the same time, online retailers have to deal with increasingly experienced and savvy shoppers who expect and know how to look for offers such as free shipping and who are comfortable using price comparison shopping tools. "Retailers need to think strategically about developing a loyal customer base," Freeman Evans said.

The study also found that offline and online purchases will increasingly be influenced by buyers' online research activities, from 27 percent of total retail sales in 2005 to almost half in 2010, a proportion she described as "enormous."

"This talks to the need by retailers to have a cross-channel, multi-channel strategy and become much more integrated over the next five years. They need to be much more savvy about the value of online in terms of influencing purchases," Freeman Evans said.

Jupiter Research, a division of Jupitermedia excludes automotive, travel and prescription drug sales from its definition of the online retail market.

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