E-Commerce Goes On a Roll

Growth in e-commerce, spurred by travel sales and a general renewed
confidence on the part of consumers, continues to be a bright spot in the
Internet economy, despite a continued slump in IT spending by businesses.

The Commerce Department said in its first-quarter
report that the U.S. economy was running at the fastest pace in more than two
years as consumers resumed spending and a year-long trend of sharp cutbacks
in business inventories showed signs of tapering off.

U.S. gross domestic product, measuring the amount of goods and services
produced within U.S. borders, shot up at a 5.8 percent annual rate in the
first three months of this year — a full percentage point higher than the
forecasts of private economists.

And online purchasing by consumers clearly was a factor, as various other
reports show e-commerce continues to accelerate.

In fact, soaring consumer sales in the U.S. broke records left and right and
topped $17 billion in the first quarter of
this year, thanks in part to the travel sector, according to a report from comScore Networks.

And BizRate.com said it sees e-commerce as an
industry that is accelerating, not maturing or decelerating, according to its
first-quarter numbers.

The quarter showed year-over-year online retail sales gains of about 41
percent to $11.60 billion versus $8.22 billion in the same period a year
earlier. BizRate’s figures exclude travel spending.

Online orders grew by 33.9 percent this past quarter from 68.29 million
purchases in the first quarter of 2001 to 91.47 million in the first quarter
of this year. The average online this year was $127 per purchase, up 5.3
percent from $120 a year earlier, BizRate said..

“There is a still a perception that online industries are faltering, but this
is actually the reverse with online retail sales,” said Chuck Davis,
president and CEO of BizRate.com.
“The trend shows that consumers love buying online and are shifting their
purchases from off-line to online — and at ever-increasing levels ….”

For empirical evidence, one need look no further than some recent sales and
earnings reports from companies like retail giant
, and travel leader

The GDP report, meanwhile, said that consumer spending grew a healthy 3.5
percent, but below the 6.1 percent recorded in the fourth quarter of 2001.

An 8 percent drop in spending on durable goods such as cars was offset by an
8.4 percent surge in purchases of nondurable items like clothes. The gain in
nondurable goods was the biggest since an 8.9 percent jump in the second
quarter of 1975. Clearly there was a lot of pent up demand.

“This economy is getting back on a good growth track, which down the road
will mean good things for the restoration of jobs and companies’ profits,”
Ken Mayland, president of ClearView Economic, told the Associated Press.

However, other economists sounded a cautionary note, pointing out that a big
factor in the economy’s first-quarter expansion was a slowdown in inventory
liquidation by businesses. That added 3.10 percentage points to the GDP, its
largest contribution since the fourth quarter of 1987.

And the bad news, particularly for B2B companies dependent on IT spending for
their revenues, was that business investment on structures, equipment and
software fell 5.7 percent in the first three months of this year after it
plunged 13.8 percent in the fourth quarter, according to the Commerce

Investments in information technology fell 4.7 percent, despite a 20.3
percent rise in spending on computers. The slowdown in IT spending has been
cited as among the reasons for
difficulty in the e-commerce infrastructure/integrator industry

But for e-tail, the outlook is bright. BizRate.com is increasing its estimate
for 2002 total online retail sales from 26 percent growth to 44 percent.
Total online retail sales, which were an estimated $28.91 billion in 2000 and
grew to $35.87 billion in 2001, are now forecast to be at $51.48 billion for
all of this year.

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