E-commerce Penetration on the Rise

Congratulations are in order for the e-commerce industry, as the Census Bureau of the Department of Commerce found that year-over-year online retail sales were up by more than 25 percent. The preliminary figures revealed that e-commerce accounted for 1.9 percent of total retail sales in the fourth quarter of 2003, resulting in revenues of more than $17.2 billion.

The retail industry as a whole performed very well during 2003, with second and third quarter figures coming close and surpassing the Q4 2002 total — the time of year when sales are at their peak. With the U.S. Department of Commerce estimating that total retail sales for Q4 2003 would be roughly $918.2 billion, it is very likely that the industry will break $100 billion over the coming year.

Patti Freeman Evans, an analyst with Jupiter Research (a unit of this site’s corporate parent) expects the portion of retail sales that can be attributed to the e-commerce influence will continue to climb. “The Internet continues to grow as a percent of total retail and we project it reaching 5 percent by 2008. Still small, but that is partially due to some very large categories not achieving high penetration — grocery is the big example here.”

“Also, that five year projection does not say that we believe the penetration will stop there, don’t think so but not projected out further,” continued Freeman Evans.

Research has shown that even when items are not actually purchased online, the Internet plays a valuable role. “…the influence of online to offline purchases continues to grow. Where by 2008 nearly 30 percent of all offline purchases will have been influenced by research done online. So the simple figure of online sales is not the true measure of the value and impact of online,” said Freeman Evans.

Estimated Quarterly U.S. Retail Sales:
Total and E-commerce (in billions)
Period Retail Sales
E-Commerce E-commerce’s
% of Total
Q4 1999 $787,362 $5,393 0.7%
Q1 2000 $715,102 $5,772 0.8%
Q2 2000 $775,364 $6,250 0.8%
Q3 2000 $768,559 $7,079 0.9%
Q4 2000 $812,667 $9,248 1.1%
Q1 2001 $723,710 $8,009 1.1%
Q1 2001 $801,115 $7,904 1.0%
Q3 2001 $777,882 $7,894 1.0%
Q4 2001 $850,608 $10,788 1.3%
Q1 2002 $740,020 $9,470 1.3%
Q2 2002 $818,609 $9,761 1.2%
Q3 2002 $822,125 $10,465 1.3%
Q4 2002 $864,653 $13,770 1.6%
Q1 2003 $772,185 $11,928 1.5%
Q2 2003 $858,793 $12,464 1.5%
Q3 2003R $872,634 $13,284 1.5%
Q4 2003P $918,245 $17,226 1.9%
Notes: Estimates are based on data from the Monthly
Retail Trade Survey and administrative records, and
are not adjusted for seasonal variation, holiday or
trading-day differences, or price changes. Retail
sales estimates exclude food service. E-commerce
sales are defined as sales of goods and services
where an order is placed by the buyer or price and
terms of sale are negotiated over an Internet, extranet,
Electronic Data Interchange (EDI) network, electronic
mail, or other online system. Payment may or may not
be made online. R = revised; P = preliminary
Source: U.S. Department of Commerce

The computer hardware and software category generated $4.2 billion during the fourth quarter of 2003, according to comScore, representing a 38 percent increase over Q4 2002. While the furniture and appliance category only rang up $430 million during the last quarter of 2003, the category was up 58 percent over the previous year.

“Home improvement, housewares, personal care products will have the fastest growth over the next five years. Online sales of large appliances and furniture are still very small percent of total sales in their categories so the percent growth was high on a small base. Over the next 5 years, we [Jupiter Research] project them to grow at about 25 percent CAGR,” said Freeman Evans.

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