E-Commerce to Explode in the Next Five Years

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Online retail sales are expected to nearly double during the next half-decade, a new study from Forrester Research shows. The report, “U.S. e-Commerce: 2005 to 2010,” projects that consumer transactions on the Web will grow from $172 billion this year to $329 billion by the end of the decade, with 14 percent compound annual growth rate (CAGR).


Forrester Research analysts characterize online shoppers generally as higher earners and bigger spenders than their offline counterparts. These consumers are driven to the Web by the considerable research capabilities for the products they’re mulling over, as well as the convenience offered by shopping from home at any time they like. Also, the wealth of options and sheer number of competitors ensures that deals on almost anything can be found on the Internet. Surprisingly, the Forrester report suggests that the actual number of U.S. households that shop online will grow from 42 million to a little more than 55 million, an increase of less than a third, which indicates that the buying power and Web purchases of these high-end customers will expand appreciably faster than the actual number of Internet consumers.


So what exactly will they buy? Overwhelmingly, it will be travel arrangements such as airline tickets, hotel accommodations and rental cars. To illustrate, when you take travel out of the e-commerce equation, Forrester’s $329 billion forecast falls to $210 billion. Additionally, online sales’ predicted share of the overall retail market drops from 13 percent to 9 percent.


Apart from travel, the largest sectors of online retail sales will include home products (furniture, appliances and tools), apparel (clothes, accessories and shoes), and automobiles and auto parts. Forrester also anticipates that the fastest-growing segments of e-commerce will be food and beverages, and health care and beauty products, which are projected to increase by 24 percent and 22 percent, respectively.


For more information, see http://www.forrester.com.

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