There's never been a question that online shopping steals purchases from offline retailers. The debate has been how many. Now, a new report finds that some 94 per cent of Web shopping comes at the expense of offline retailing.
Jupiter Communications, a New York Internet research company, estimates that of the $US11.9 billion consumers are projected to spend online during 1999, well under a billion, or some 6 per cent, will be purchases that would not have been made in bricks-and-mortar stores or through catalogues.
And Jupiter forecasts that, as consumer e-commerce revenue rises to $US41 billion by 2002, the portion of incremental sales will only rise to 6.5 per cent, meaning the Web will be displacing over $38 billion in offline sales by that time.
Even though e-commerce accounts for only a fraction of US retail sales today, Jupiter analyst Ken Cassar says these findings are a wake-up call for traditional retailers who have opposed investment in Web operations due to fears of cannibalising offline sales.
"Merchants must accept that cannibalised sales are better than lost sales," Cassar said, noting that vendors must work to combine the strength of their offline brand, distribution and customer base with an online business.
And for Net-only retailers, Jupiter says the low percentage of incremental buying means companies must work hard to retain current clients, as well as increase their share of each customer's spending, or risk losing them to other online retailers.
The report says that incremental buying online will be driven by the merchant's ability to target promotions effectively and will be most successful with impulse buys and products with a low price point.