Is E-Tailing Really That Big?

by Dan Blacharski

July 26, 2005 —

This week's highlighted research:

Research and Markets. "Trends in online apparel retailing, forecasts to 2010"

Nielsen//NetRatings. "Online retail report card: Highest conversion rates amongst non-brick-and-mortar retailers."

Forrester Research. "The state of retailing online 8.0."

Online retailing, or "e-tailing" as the hypesters call it, is just about ten years old. In that ten years, its promise and potential has been discussed and analyzed, and people have predicted both enormous success and sudden death. It's had a little of both. In reality, e-tailing hasn't put any brick-and-mortar stores out of business, and it isn't likely to do so in the near future.

The depressing success rate of online retailers may be a little skewed simply because of the ease with which one can set up an online shop. With very little thought, an afternoon's work, and a bit of pocket change, anybody can set up an online shop. This is both good news and bad news; because it is so easy, the purveyors of instant web shops and e-commerce solutions have created an image of quick riches. A sort of "build it and they will come" philosophy of retailing. But unhappily, the reality of it is that simply building it and placing it online will not bring much in the way of sales. Like any brick-and-mortar business, it takes time, advertising, strategy and patience.

The study from Research and Markets looks back to the "dotcom boom" and all the hype that surrounded online retail, accurately pointing out that during that bubble, companies with negligible sales were overblown, stock values shot through the roof, and then they fell flat. Companies with more venture capital than common sense tried to peddle everything imaginable, but cute commercials with sock puppets promoting dog food didn't cut the mustard. Low-end commodity items just don't sell online. The study takes a common sense look at the market, and answers the question of whether or not you should e-tail.

Just what does sell online? Members of the eBay fan club say you can sell just about anything, and indeed, every now and then you see a press release describing how someone is selling something incredibly silly on eBay: a half-eaten sandwich, grandma's ghost, or the seller's own conscience. But the greatest profit-taker on eBay is eBay itself, which takes a fee every time someone gets a wild hair to clean out their attic and put its marginally useful contents on eBay. Nielsen//NetRatings' report card shows the ten biggest online retailers, and the top 15 product categories or online sales; a very useful report indeed when trying to decide whether what you have to offer will make the grade in the online marketplace. At the top of the list of successful online retailers is QVC, followed by Lands' End, sportsmanguide.com, FTD.com, and llbean.com; also included in the top ten are Amazon, Coldwater Creek, eBay, Yahoo! Shopping, and proflowers.com. Of the top ten, only one has a significant brick-and-mortar presence. An interesting statistic indeed; and the report suggests that although brick-and-mortar stores do get some good traffic on their sites, most visitors actually make their purchases offline and use the web site for pre-purchase research.

Forrester's research does show online sales increasing, noting that categories with products purchased by women will have the most growth this year. Still, this year online sales is still just 4.6 percent of total retail sales. But the exciting thing is that several categories are getting at least ten percent of their sales online, including computer hardware and software, tickets, travel, books, consumer electronics, cosmetics and fragrances, toys and video games, and flowers, cards and gifts.

ITworld.com