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The Future of Online Retail Doesn’t Look…Too Bad

Cautious optimism.

Everyone knows the economy—online and off—is bad. What no one knows for sure is when the situation will improve.

But things will get better.

eMarketer forecasts that US retail e-commerce sales (excluding travel) will total nearly $132 billion in 2009, down 0.4% from 2008.

But, assuming the recession ends this year, as many economists predict, the forecast indicates that online sales will begin to rebound in 2010 and hit full stride in 2011.

Declining sales growth rates do not tell the whole story.

“Everyone focuses on the downturn in the overall economy, but the recession has only accentuated the gradual decline in online sales growth over the past few years—the decline would likely have occurred even in normal economic times,” says Jeffrey Grau, eMarketer senior analyst and author of the new report, Retail E-Commerce Forecast: Cautious Optimism. “It’s just simple math: The bigger online sales become, the harder it is to maintain high levels of growth.”

Greater spending by incumbent online buyers is the key to continued e-commerce growth.

Some 152 million individuals ages 14 and above will shop online in 2009.

“That means almost nine out of 10 Internet users will browse, research or compare products online this year,” says Mr. Grau. “This rate will grow slightly by 2013, since most Internet users predisposed to online shopping will already be doing it.”

Yet measuring e-commerce’s potential solely in terms of online sales ignores the impact of cross-channel shopping.

“The recession has made online product research an imperative,” says Mr. Grau.

According to PriceGrabber.com, the tough economy is driving consumers online to compare prices, look for retailers that do not charge sales tax or shipping fees, seek discounts and avoid impulse buying.

“Cross-channel shopping tends to fall under the radar because it is harder to measure than e-commerce sales,” says Mr. Grau.

Forrester Research estimated that store sales influenced by online research are higher than retail e-commerce sales. For 2009, Forrester projected cross-channel sales of $758.8 billion—about three times higher than online sales of $235.4 billion.

“Retailers still have plenty of work ahead to weave their channels into a single, unified presence,” says Mr. Grau. “If enough succeed, it could contribute to building greater consumer confidence in e-commerce.”

Look into the future, check out the new eMarketer report, Retail E-Commerce Forecast: Cautious Optimism.

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