RETAILERS’ CHALLENGE:
GETTING MORE BROWSERS TO BUY

While still in an emerging state, the online retail sector is experiencing growth in excess of 200 percent per year, with the top 10 publicly traded online retailers experiencing year-over-year revenue growth in excess of 160 percent, Boston Consulting Group (BCG) reports in a new study of 127 online retailers. Among those studied were catalogers Eddie Bauer, Lands’ End and Dell Computer Corp. BCG conducted the study for shop.org, the online retailing industry association based in Silver Spring, MD.

Findings demonstrated that the Internet is bringing new business to those companies instead of shifting it from mail order operations or retail stores In addition, growth in traffic has been rapid, and revenue-per-order is increasing.

Sites, however, are having trouble getting a "buy" commitment from Web surfers. Only 5 percent of unique visitors to sites become customers, and only 1.6 percent of visits result in purchases, the survey said. Small improvements in conversion can result in dramatic increases in revenue.

The online retailers surveyed are investing heavily now to grow their customer bases; 65 percent of revenues generated are being plowed back into marketing and advertising, compared with 4 percent for most traditional stores. Online retailers’ marketing and advertising spending per order generated is $26, compared with $2.50 for traditional stores.

A lot of retailers may be selling online, but the study said the 10 largest sites account for half of shopping revenues. Computer goods, entertainment, travel and discount brokerage account for over 80 percent of the online retail market.

Shop.org is at http://www.shop.org.