posted on January 12, 2003 11:24:45 AM new
Investor's Business Daily
Online Buying Could Top $51 Bil This Year
Tuesday January 7, 10:58 am ET
By Pete Barlas
Five years ago, most people wrote off e-commerce as a kind of novelty act. Not anymore.
Consumers' appetite for buying everything from toys, books and computers online will push e-commerce sales - excluding travel and auctions - to more than $51 billion in 2003, says a recent report by market tracker Jupiter Research. That's up from $40.4 billion in 2002 and a mere $12 billion in 1999.
Online retail is still only about 1% of total retail sales, but that could change as more consumers jump on board. The huge gains of 2002 are a promising sign, analysts say.
"We are seeing the biggest dollar increase in online sales in any year other than 2000," when sales doubled to $24 billion, said Ken Cassar, senior analyst for Jupiter.
E-commerce is no longer just for computer-savvy geeks. All kinds of shoppers surf the Internet for deals, says Michelle David Adams, analyst for the research firm comScore Networks Inc.
"Now it's the grandmother in Nebraska who is online," she said. "There's no reason to believe that the growth is going to de-accelerate at all."
The online population is soaring. A total 156 million U.S. residents - 54% of the population - were online in 2002, says Jupiter. That was up from 141 million the prior year.
The number of online shoppers increased to 82 million vs. 66 million in 2001.
Plenty of companies are cashing in. The largest include Yahoo Inc., Amazon.com Inc. and eBay Inc.
Yahoo isn't strictly an online retailer, but it runs a Web shopping center with more than 30,000 stores. Though its earnings dipped in 2001, the company has stayed profitable through the dot-com era's boom and bust. Likewise for eBay, the world's largest online auctioneer.
Amazon, the largest single online shop, is also in the black these days. It's expected to earn 12 cents a share in 2002, thanks largely to a huge fourth quarter.
The big three of e-commerce will compete more intensely in 2003, analysts say. Already, Yahoo and Amazon have expanded into eBay's turf, auctions. Such skirmishes will continue, says Jonathan Hurd, analyst for Adventis, a consulting firm.
"We are probably going to see those companies intruding more on each other in the year ahead," he said.
Some companies are still just getting into the e-commerce game.
Google Inc., which runs a leading Web search engine, quietly launched an e-commerce version of its service last month.
The service, Froogle, is a search engine designed to help consumers find retail sites to buy products. The company plans to test the service before formally launching it.
Google designed Froogle in response to consumer demand. People requested a search service that would single out places to buy products as opposed to just digging up a slew of general information, says Google spokeswoman Eileen Rodriguez.
E-commerce is nothing new. But early on, many consumers were wary. They relied on the Net to e-mail friends and search for general information, but not to shop.
The fear of shady e-tailers or credit card fraud kept many consumers away, says Jupiter's Cassar. Those fears have abated, he says.
"People are learning that it's relatively safe to buy online," he said.
Convenience is also a factor. Many consumers like to shop from home or work without driving to a mall.
Retailers are also making it easier to return items. Goods ordered online can often be returned at brick-and-mortar stores, says Chuck Davis, president of BizRate.com, a researcher and online comparison shopping service.
"There are lot more retailers taking returns in stores than there were last year," he said.
Customers can also order online and pick up items in local stores to avoid shipping costs.
A record number of online retailers offered free shipping during the recent holiday season. Look for the free-shipping trend to continue, analysts say.
Computers and accessories are the most popular products bought online. Internet sales of such goods are expected to hit $11.3 billion in 2003, Jupiter says. That's up from $9.7 billion in 2002.
Apparel ranks second, with a sales forecast of $6.1 billion in 2003 vs. $4.7 billion in 2002.
Books come third, with expected sales of $3.1 billion. That's up slightly from $2.8 billion in 2002.
Rounding out the top five will be software at $2.9 billion, up from $2.6 billion last year, and event tickets, which will generate $2.7 billion in 2003 vs. $2.1 billion last year.
As e-commerce grows, consumers might have to face a new issue: the sales tax.
As things stand now, consumers who purchase goods from retailers that have headquarters or a warehouse in the same state will pay a sales tax as part of the transaction.
Retailers don't collect sales tax from consumers who live out of state. In those cases, consumers are legally required to report the unpaid sales tax on their annual returns.
But that doesn't happen much, says Cassar.
"If you did pay it, you would be in the minority," he said.
Cassar says states will likely work out a system where online retailers based out of state will be required to collect and disburse taxes to states where their customers live.
"A lot of states are looking for ways to generate revenues," he said.
Is the lack of a sales tax a competitive advantage for some online retailers?
You bet, says comScore's Adams.
"Depending on the size of the purchase, it definitely could be," she said.
posted on January 12, 2003 11:53:08 AM new
I really don't see why analysts continually seem to be surprised by this. Or why business nws sources continue to report it.
The internet is not a fad. It's not going away. It's only going to get bigger. And that includes shopping.
Eventually th Internet will replace 95% of the catalog shopping places. Most "mail-order" will be done over the net.
With the exception of ultra-convenience shopping options [QVC, HSN, etc], I don't see how traditional mail order companies make it.
posted on January 12, 2003 03:48:20 PM new
Many traditional mail order companies now have yahoo stores. From reading this article I think yahoo will do something down the road with their auctions. They have 30,000 stores at $600.00 yearly, not to mention the per item fee, and FVF on the store items. They are making a tremendeous amount of revenue off the stores so no wonder they have not been promoting the auction site. Could you imagine the damage they could do to ebay if they actually tried???
posted on January 12, 2003 05:22:14 PM new
With 30,000 Yahoo stores I don't think Yahoo should mess around with it's penny ante auctions any more. The money for them is with their online retail sellers and not a handful of auction sellers.
posted on January 12, 2003 05:25:36 PM new
Hmmm. Let's do the math.
30,000 Yahoo stores x $600/year= $18,000,000 per year.
Not bad- they can certainly make some money there.
But then figure
6,000,000 eBay auction listing fees per week (a low number) x $0.30 = $1,800,000/week x 52 weeks = $93,600,000 per year
18,000,000/93,600,000= 0.1923
Yahoo's entire store business makes up less than 20% eBays basic listing fees.
Now keep in mind, that's ignoring Yahoo auctions which is relatively small and eBay stores which are also relatively small. We'll assume they cancel each other out equally.
Granted there are a lot of assumptions and things left out (FVF's on both sides and eBay's listing "enhancements" for example) but the basic numbers speak for themselves.
Yahoo is #2, but still a very distant number two.
But to agree with blairwitch, yes that's a lot of money no matter how you compare it to anyone else. I've always thought Yahoo stores were overpriced, but apparently a lot of places don't agree with that.
posted on January 12, 2003 07:57:34 PM new
I wonder how many of those 30,000 Yahoo stores make any real money for their store owners or they merely making an internet presence for the sake of making an internet presence? Why not open an ebay store if you're going to have an internet store at all?
Will we soon seen Google stores too? I believe in a year or two that Google will be a much bigger player than they are now and will have more revenue than Yahoo as Yahoo sadly seems incapable of changing with the times.
posted on January 13, 2003 10:54:43 AM new
$49.95 a month is cheap for a business store on yahoo. eBay will have about the same luck with their stores as yahoo had with auctions. I look for the amount of yahoo stores to double easily. Now if they can get the auction site going again.
posted on January 13, 2003 05:15:23 PM new
Tooltimes- Actually Yahoo stores are pretty nice. They are very flexible and customizable. I still think they are too expensive for stores with serious inventory (As I mentioned on another thread, it would cost me over $2000.00 a month for a Yahoo store), but I wouldn't mind having one at a reasonable price.
eBay stores all look alike and they're butt-ugly. 11 Categories with no sub-categories isn't very flexible at all. You can list tons of stuff, but there just isn't any customization to help build a brand.
I have an eBay store and it generates a couple of sales a month, but to compare the two is really Apples & Oranges. There's no way I'd give up a real website for an eBay store.
posted on January 13, 2003 07:02:02 PM new
replaymedia have you tried listing on yahoo auctions, and directing your ebay winners there? It works great for us.
There is a 30 day trial for the stores, but it would be alot of work to add all the items. Will you list anything this Wednesday?
posted on January 13, 2003 07:48:19 PM new
"Will you list anything this Wednesday?"
Heh Heh.
Last time Yahoo had a FLD, I listed over 4000 items. Last month on eBay's FLD, I did nearly 8000.
This time I'm shootin' for 10K. No more playin' around! I guess it all depends on my listing service and Yahoo's ability to hold up. Never really had a problem there before on a FLD.
Actually I usually direct the winners on ALL of the auction sites to my own website. No commissions go into anyone's pockets but mine at that way.
posted on January 13, 2003 09:04:35 PM new
In the past ebay limited the number of free listings to 1,000 per account. Did you find that limit was present on the last ebay FLD or do you have 8 seperate accounts? Just curious.
posted on January 14, 2003 11:33:17 AM new
"How about the ebay FLDs?"
This most recent one was the first I've been able to really take advantage of. I've always had problems with the auction management service being able to keep up.
Did just a hair under 8000 auctions, no limits there either, other than the "artificial limits" of running out of time and delays caused by the overloading.
posted on January 14, 2003 12:27:37 PM new
Thanks! I remember they once put a limit of 1,000 free auctions on an ebay FLD.
I remember when Yahoo placed a 1,000 auction limit on their regular free auctions. I had to open a second account as I had over 1,500 listings at all times.
posted on January 14, 2003 12:51:09 PM new
Yeah, if it were free all the time, I can certainly understand them putting a limit on it.
Otherwise you'd have people upload fifty thousand copies of
"I'm leaving eBay, Learn my secrets! LQQK"
Instead of -only- a couple hundred.
On the other note, it's not so easy to open a second Auction account. I tried to open one and apparently I put in the same credit card number I had already used, or maybe it was the same mailing address- I don't remember.
It always says "the card you originally signed up with has been registered under a different account." But it won't let you put a new card number in.
For this reason, I have a really goofy "Yahoo Assigned" name instead of my real world business name on Yahoo!
posted on January 14, 2003 01:18:09 PM new
That's quite a departure from ebay then. There can be multiple accounts on the same credit card there I believe. The street address should never have any bearing on any account anywhere as there are large rental homes with many bedrooms rented out that would be affected for instance.
The bookkeeping associated costs must be the reason for Yahoo clearing out their deadwood accounts. Those costs would be less at ebay because buyers do not need the special scrutiny that sellers get there, while at Yahoo the buyers are treated the same as the sellers.
The FLD coming just before the account purging would keep more sellers and maybe bidders with active accounts. That may be similar to all Macy's charge card holders being told their cards would be no good if they hadn't used them in 6 momths and then having a big Macy's sale just before the new policy is to take affect.
