The House of Mirth

“The more the merrier,” they say, and it couldn’t be more true than in the retail business — the more sales channels you have, the more profitable you’re likely to be. Although online operations as a whole reported higher profits last year, multichannel merchandising exhibited a clear advantage over other business models, according to a new study of over 100 retail companies of varying sizes in a wide range of industries.

The report, titled “The State of Retailing Online 5.0,” is published annually by Shop. org, The Boston Consulting Group, and Forrester Research. In the 2002 version, the key findings are that multichannel retailers’ share of online revenue surged to 67% in 2001 from 54% the year before, and that these merchants will enjoy a compound annual growth rate of 72% between 1998 and 2002, compared to 60% for pure-play businesses. In 2001, catalog-based merchants posted positive operating margins of 6%, compared to a net loss of 6% for the total online retail market (although the researchers expect store- and Web-based retailers to break even this year).

Shoppers spent $51.3 billion on Internet purchases in 2001, a 21% increase from the previous year, and are predicted to lavish $72.1 billion on online merchandise in 2002. People who buy from a variety of sales avenues spend an amazing 72% more a year than shoppers who stick to one channel.

For their part, retailers have wised up somewhat to the economics of online retailing. Between 2000 and 2001, they’ve managed to lower the per-order cost of marketing from $20 to $12 and slash the price of customer acquisition from $29 to $14. But much remains to be done: Fulfillment and customer service costs remain high, and only 39% of companies can create customer profiles across multiple channels.

For more information, call Ray Greenly at (202) 626-8190 or visit www.shop.org.

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