Experts See Web Sales Leveling Off After Quick Growth

by Mark Friedman  on Monday, Mar. 3, 2014 12:00 am  

From basically zero 20 years ago, online sales have already taken 6 percent of all U.S. retail sales. By 2017, that share is expected to jump to 10 percent.

But then what?

Some analysts suggest online sales will quickly double or possibly triple as a share of the retail marketplace — and then stall, maturing into an important component of the shopping experience but still leaving plenty of demand for brick-and-mortar stores that play their cards right.

“Are we going to level off at 10 to 15 percent of total sales?” asked Paula Rosenblum, a managing partner of RSR Research LLC, which provides research for the retail industry. “Or are we going to see it continue to go up and up? I think the next two years will tell us that.”

“Online shopping is certainly causing changes in the retail landscape,” said Jay Henderson, IBM’s global strategy director for Smarter Commerce, which sells software to study the trends. “That’s why we’re seeing retailers doing some creative things to try to blend the best of online shopping into the store with mobile promotions and things like that.”

One of the changes coming to retail is downsizing, the polar opposite of the bigger-is-more trend that made big-box stores ubiquitous in the first place.

Online sales were a bright spot for retailers during the 2013 holiday season, Henderson said. Total holiday retail sales reached $601.8 billion, up 3.8 percent from the holiday season in 2012, according to the National Retail Federation. But the upward trend was far stronger in online and e-commerce sales: up 9.3 percent to $95.7 billion.

Starbucks Coffee Co. President and CEO Howard Schultz took note. He said the foot traffic in his coffee shops in December wasn’t as strong as in the previous year, and he blamed it on people staying home to do online shopping.

“I do believe that there will be a real sea change for many, many retailers,” Schultz said in a conference call discussing earnings. “This is going to be an ongoing issue, and it’s going to happen faster than people think in terms of the way people are shopping.”

The online retail king is Amazon.com, which saw its sales grow to $74.5 billion in 2013, up almost 22 percent from the previous year. In Amazon’s fourth quarter, sales increased 20 percent to $25.6 billion over the same quarter in 2012.

Wal-Mart Stores Inc. of Bentonville, the largest retailer in the world, saw even faster growth of online sales — up 30 percent in fiscal 2013. But the total was still just $10 billion — less than Amazon’s sales grew in a single year and only 2 percent of Wal-Mart’s total sales of $473.1 billion during the year that ended Jan. 31.

And it’s easy to conclude that some of Wal-Mart’s online sales growth came at the expense of its stores. While total sales were up 1.6 percent from the previous year, sales at stores that had been open at least a year — the all-important “same-store sales” measure — were down for four consecutive quarters.

 

 

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