Live from NRF: Online Retailing Nears $100 Billion Mark

New York–Shop.org, the online marketing unit of the National Retail Federation (NFR), says that online sales will come in at $96 billion-$100 billion for 2003 and $125 billion this year, according to a survey, “The State of Online Retailing,” it conducted with research firm Forrester Research.

The 2003 figure represents a 32% increase over ’02, with e-commerce now representing 4.5% of all retail sales. The anticipated 25%-plus growth for 2004 would bring online shopping up to 5.6% of all retail sales.

Despite an economy that’s struggling to rebound, Kate Delhagen, Forrester Research’s principal analyst, retail, said during a panel discussion at the NRF Annual Convention here on Jan. 12 that online sales not only continue to grow but also that almost all of the largest online retailers are now profitable.

Sales in virtually all product categories have improved. In the health and beauty products category, online sales increased 93% between 2002 and 2003; for apparel, 54%; for flowers, cards, and gifts, 50%. What’s more, as Delhagen pointed out, 2003 was the first year in which female shoppers outnumbered male shoppers online, “and it’s going to continue that way” going forward.

Among the marketers taking part in the panel , Elaine Rubin, senior vice president, strategy and business development for Westbury, NY-based gifts and home goods marketer 1-800-Flowers.com, noted how the company with its assorted properties acquired in recent years–the Plow & Hearth, HearthSong, Popcorn Factory, and Magic Cabin Dolls catalogs, in addition to its flagship flower and gift direct/retail business–has pulled its economies of scale together to build a fully integrated platform.

Office supplies marketer Office Depot has taken a similar tactic with its retail chain, namesake and Viking Office Products catalogs, and Websites, said executive vice president, e-commerce Monica Luechtefeld. “We’ve leveraged our marketing distribution and fulfillment costs, and produced margins consistent with our operating profit as a result,” she said.

Both Rubin and Luechtefeld discussed the challenges they face to grow the online portions of their respective businesses. “Our differentiation has to be in our content,” Luechtefeld said. “We need to develop a great content management program and publish it in many languages and media.” Rubin said that 1-800-Flowers’s greatest online challenge is to develop more than just product information for its Websites. “We’re focusing on customer engagement features,” she said.

Both agreed that “e-mail is the topic of the moment,” as Rubin said. With the Can-Spam Act now in effect, “one of the least talked-about issues has been how we get thrown into all these filters” with spam, she said. “Now our e-mails are saying to Internet service providers that we must be spammers even though we’re legitimate e-mail marketers.” Rubin, who is also the chairman of Shop.org, said that the group is putting together member task forces to focus on differentiating “legitimate” e-mailers from spammers.

Luechtefeld said that her biggest concern with Can-Spam is its penalties for marketers who don’t remove consumers from their mailing lists within 10 days of opt-out requests. “We have to make sure that they get removed from all of our channels,” she said. “We’re also concerned about customers not opening our e-mails anymore and our opt-in rates falling….But that’s the Internet,” she added, “and what worked last year, won’t work this year.”

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