Business-to-Consumer (B E-Commerce (2C) - Underlying Strength

UNDERLYING STRENGTH

Despite difficulties, during 2000 online shopping continued to rise. Growth was attributed to new shoppers as well as to more spending by established customers. During the year online retailing received greater support from offline retailers who wanted to add new distribution channels and shore up their revenues. Strong ties to established brands in 2000 helped the growth of "bricks and clicks," further integrating traditional retailing with online channels.

In 2000 approximately 64 million Internet users participated in some form of online shopping-related activity, and 24 million households purchased at least one item online, according to a report from eMarketer. According to the U.S. Census Bureau, the third quarter of 2000 saw a 15.3 percent increase in online sales over the previous quarter. Total Internet sales reached $6.37 billion in the quarter, but online purchases made up only 0.78 percent of all retail sales, up from 0.68 percent in the second quarter. The categories of online retailers with the strongest growth in the quarter were mail-order firms, automobile companies, and online bookstores. Mail-order companies and traditional retailers showed faster growth in the quarter than pure-play e-tailers. Their strong performance was attributed to having infrastructures in place, such as distribution, customer relation, and billing systems, as well as having recognizable brands. Consumers also appeared more comfortable making online purchases: repeated Internet use and knowing other people who bought online were reducing concerns about security and Internet fraud.

For the 2000 holiday season, online shoppers spent an estimated $10.7 billion, according to a study by Goldman Sachs and PC Data Online. That included $878 million spent online in the week after Christmas. The report found that online sales during December increased 60 percent over the previous year, and online sales for the 2000 holiday season more than doubled from the $5.2 billion spent during the 1999 holiday season. A study by Media Metrix (now Jupiter Media Metrix) found that traffic to e-tail Web sites during the 2000 holidays increased by more than 30 percent over 1999 levels, with online retailers reporting an average of 34.2 million unique visits each week. Other estimates of online spending for the 2000 holidays ranged from $10.8 billion to $12.5 billion.

Estimates of the amount spent online during all of 2000 varied considerably. In January 2001 Activ-Media Research reported that online shopping in 2000 reached $56 billion, with sales during the holiday season of about $9 billion. That compared to an estimated $3.5-to $4.5 billion spent during the 1999 holiday season. Factors contributing to the surge in online holiday spending included better order processing systems and more effective marketing promotions. Some 57 percent of all consumer-oriented Web sites had e-commerce capabilities, while an additional 36 percent provided pre-sale information and post-sale support without actually taking orders. The research firm projected that online B2C sales would reach $1.1 trillion by 2010.

The U.S. Census Bureau reported that online shoppers in the United States spent $28 billion in 2000, an increase of 62 percent over the $17.3 billion spent in 1999. The Census Bureau said that online shoppers spent $7.8 billion on airline tickets in 2000, followed by $5.1 billion on personal computers and $2.1 billion on hotel rooms. The Bureau's figures did not include online travel services, financial brokers and dealers, or ticket sales agencies. The study was prepared for the Census Bureau by Jupiter Media Metrix, which projected that total e-commerce sales would reach $213 billion by 2005.

A 2001 report by the Boston Consulting Group found that 68 million Internet users in the United States—representing 55 percent of all Internet users—purchased something online in 2000, up from 53 million in 1999. Some 70 percent of Internet shoppers reported problems with Web sites taking too long to load, followed by 20 percent having trouble getting a site to accept their credit card. About 11 percent reported a problem of not receiving merchandise that was ordered and paid for.