Web-only retailers move into the black

Costs down, profits up

By ElectricNews.net, 26th May 2004

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Web-only retailers are beginning to turn a profit, thanks to stronger uptake and trimmed-down costs, a new survey has revealed.

Online sales in the Unites States jumped to $114bn last year, a doubling of year-before sales of $75.7bn, according to the Forrester Research and Shop.org, the online arm of the US National Retail Federation trade association. The total value of online sales in 2004 is forecast to account for about 6.6 per cent of all retail sales, up from 5.4 per cent a year ago, according to the report.

The survey, based on confidential information from 150 retailers, explores the opportunities and challenges facing retailers selling and marketing on the Web, including store-based, catalogue-based, and Web-only retailers.

The massive increase was due to decreased marketing spends and a broader population of online shoppers, according to "The State of Retailing Online 7.0" report. While each online product category experienced strong growth in 2003, online travel sales were particularly solid, increasing 91 per cent to $52.4bn. Home and office ($11.1bn) and computer hardware and software ($11.0bn) were also major drivers for online growth.

A sub-group of Internet-only retailers, which includes book-selling giant Amazon.com, had an average profit margin of 15 per cent in 2003. In 2002, the same group collectively made a loss. Mail order companies and retailers with existing physical shops have been selling profitably over the Internet for years, said the report.

Ecommerce in Ireland is bringing a wide range of people from "across the board" online, according to Buy4Now company marketing and operations manager Katriona O'Leary. Once people successfully place an order online, they are very likely to shop again because of brand names that people recognise, shed said. Online sales at the Buy4Now e-commerce portal have doubled year-on-year.

"We delivered 5,000 food orders and 3,000 non-food orders over the Christmas period. The average food order was €280 and both we and our partners have noticed online orders tend to be of higher value than in store orders," said O'Leary. "Perhaps people are making the most out of the delivery fee."

"Interestingly, concerns over security have decreased in Ireland as the quality of retailers going online has increased," she added.