Better user experience will help e-commerce soar

Out-Law News | 20 Sep 2005 | 7:49 pm | 1 min. read

US internet sales will soar from $172 billion in 2005 to $329 billion in 2010 thanks to innovations that make online shopping easier and more engaging according to Forrester Research. The increase translates to a solid 14% compound annual growth rate over the next five years.

Advert: Free OUT-LAW breakfast seminars, UK-wide: Marketing and advertising on the web; and Ownership and sharing of customer dataRelying on new online shoppers to drive sales brings only limited opportunity, according to Forrester. Instead, retailers are investing newfound profits in emerging technologies, such as sophisticated analytics and personalisation tools that enhance the online experience for existing consumers.

The result: businesses no longer view the web as a low-cost sales channel but as a way of improving customer service and retention.

Forrester Research Vice President Carrie Johnson believes that businesses are debating their online strategies. "Many believe that they became too focused on sales. Now they're looking at their web sites as a way to drive in-store traffic and increase their engagement with customers," she said. "This is a huge shift in philosophy as e-commerce enters a more sophisticated phase. But it's also creating tension as CEOs demand ROI for expensive web sites with hard-to-define metrics such as loyalty and brand."

Companies that illustrate this new philosophy include Target, which is using its web site to promote and brand its retail stores; Gap, which is launching redesigned web sites that ease the check-out process; and Nike and Timberland, two manufacturers that are exposing online shoppers to the idea of product customisation. All are being forced to become more innovative online because pure plays such as Amazon.com, drugstore.com, Blue Nile, and Newegg.com have raised the customer experience bar, according to Forrester.

Other highlights in the Forrester report:

  • e-commerce will represent 13% of total US retail sales in 2010;
  • travel remains the largest online retail category, growing from $63 billion in 2005 to $119 billion in 2010;
  • general merchandise (all retail categories excluding auto, food and beverage, and travel) will top $100 billion for the first time in 2005;
  • an increase in the number of women shoppers will contribute to 14% of jewellery sales moving online by 2010 while online sales of health and beauty products will grow at an annual rate of 22%;
  • 29% of small appliance sales will migrate online by the end of the decade as a generation that grew up with internet access begins to get married and attend weddings;
  • categories showing significant growth (growth above the overall 14% compound annual rate) include: apparel, consumer electronics, health and beauty, home products, food and beverage, and sporting goods.