Revenues from online retailing are currently growing at 200 per cent a year in North America, and should surpass $US13 billion in 1998, according to a recent study. Conducted by the Toronto office of The Boston Consulting Group (BCG) and shop.org, a trade association of online retailers, The State of Online Retailing study shows that the 10 largest sites generate 50 per cent of all online retail revenues.
It also pointed out that computer goods, entertainment, travel and discount brokerages account for over 80 per cent of the market. Retailers that combine traditional and online retailing - including Dell, Eddie Bauer, Lands End and Schwab - account for 59 per cent of online retail revenues.
The study, which examined 127 online retailers in seven retail categories rather than surveying the behaviour of online consumers, also identified potential barriers to growth. According to the study, retailers must increase consumers' comfort level with online shopping, manage technology constraints, and continue to develop low-cost distribution systems, as well as clearing several other hurdles.
Other findings include the fact that only 5 per cent of unique visitors to sites become customers while only 1.6 per cent of visits result in purchases. Additionally, online revenues generated by North American-based retailers during the first six months of 1998 were $US4.4 billion, which represents less than 1 per cent of overall retail revenue in North America.
Meanwhile, there are indications that online retailing is currently far more expensive to market than traditional shopping. A survey showed that 65 per cent of the revenues generated by the shop.org/BCG sample of online retailers are reinvested in marketing and advertising, compared with 4 per cent for most traditional stores.