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Second quarter eCommerce sales beat projections

August 11, 2005

Forrester Research just issued a new report and finds that, after a reportedly slow start to 2005, the increase in offline sales actually helped eCommerce sales in the second quarter, to exceed sales projections.

Online sales approached US$39 billion in the quarter ending in June, according to a report from Boston-based Forrester Research.

That's a 25 percent increase over a comparable period last year and a slight increase over the quarter ending in April when sales were US$38 billion.

Forrester analyst Carrie A. Johnson, who wrote the two-page report with colleague Sean Meyer, asserted that the strength of the second quarter numbers are a bit of a surprise, especially compared to last year when seasonal factors forced a decline in sales from the first to second quarters.

"After a somewhat slow start to the year, in which seasonality tempered online sales, the rising tide of offline sales lifted online boats this quarter to exceed expectations," Johnson said in a copy of the report obtained by the E-Commerce Times.

"Q1 represented the first real quarter in which online retail felt the impact of the same seasonality trends as its more mature offline counterparts," she noted.

"This trend continued in Q2, when strong offline consumer spending -- despite rising gas prices and interest rates -- had a ripple effect on online sales."

She added that offline back-to-school sales will be hurt by softening computer and electronic sales during the quarter ending in September.

"The trend will be mirrored online," she wrote, "although it's likely to be a bit less pronounced in the channel, where electronics and computer hardware still draw large crowds due to comparison-shopping capabilities and a good match with the profile of online shoppers."

Nevertheless, she maintained that sales for the year are on track to rise 22 percent.

Earlier this year, Forrester and Shop.org, the online arm of the National Retail Federation (NRF) in Washington, D.C., released survey findings predicting Web sales would climb 22 percent this year to $172.4 billion.

Ellen Davis, director of Media Relations for the NRF, said that "if anything, we can be accused as being a little too conservative" when it comes to predicting online sales.

"Online sales are continuing to grow beyond most people's expectations," she told the E-Commerce Times.

Sales categories driving growth this year, she said, include home furnishings, home improvement, grocery stores, clothing stores and department and discount stores.

"Most retailers have had a pretty good year so far," she remarked, "which is surprising, given that last year at this time sales were very strong and retailers have tough comparisons to live up to."

"Of course there are some retailers that are struggling but overall the industry is growing quickly," she said.

She noted that among the retailers struggling with their online operations are those new to the channel.

"Many traditional retailers have found it important to get into the online channel but there are always some growing pains associated with getting into a new channel," she said. "They should be able to overcome those growing pains as they become more established in the channel."

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She added that women continue to warm up to online shopping, and they will be online driving sales this year in such things as fragrances, over the counter medicine, jewelry, personal care, flowers and cards.

Next week, the U.S. Commerce Department is expected to release its second quarter e-commerce sales numbers. In its report on the first quarter, the department pegged sales at $19.8 billion, a 6 percent increase over its sales figures for the previous quarter.

Davis explained that the Forrester numbers don't jibe with those from the Department of Commerce because Forrester includes in its tally sales from tickets, travel, events and auctions, which are excluded from the federal agency's figures.

Without those additional sales categories, she noted, online sales for this year will be around $109.6 billion, compared to $89 billion in 2004.

Source: eCommerce Times



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