U.S. Retail Is Booming

By now everyone knows that retailers had a great holiday season in 2006. The US Census Bureau reports that U.S. retail ecommerce sales (excluding travel) were the highest in four years during Q4 2006. The figures below exclude travel and are preliminary for 2006.

Q4 2006 sales (nearly $33.9 billion) were up approximately one-third from Q3 2006.

The Q4 2006 ecommerce estimate increased 25 percent over the previous year, while total retail sales (online and offline) increased 4 percent in the same period. However, ecommerce sales in Q4 2006 accounted for only 3.3 percent of total retail sales.

“Retail ecommerce sales for Q4 2006 exceeded expectations by increasing 25 percent over the same quarter a year ago,” said eMarketer analyst Jeffrey Grau. “This is the biggest jump in Q4 sales since 2002 and is additional evidence that the Internet channel is stealing sales away from retail stores.”

Total ecommerce sales for 2006 were estimated at $108.7 billion, an increase of 23.5 percent over 2005. Total retail sales (online and offline) in 2006 increased 5.8 percent over 2005. Ecommerce sales accounted for 2.8 percent of total retail in 2006, versus 2.4 percent of total retail in 2005.

Online retail sales have always been small fraction of overall retail sales, but if this growth rate continues, offline-only retailers would do well to consider offering their merchandise online.

Good News for Wholesalers

This is all good news for online wholesalers. Estimates of online retail sales vary widely among researchers. While Jupiter Research predicted $100 billion in sales for 2006, a decent increase over 2005’s $80 billion, other estimates were more bullish.

Online shopping cart host CashCowCart.com projected $200 billion in 2006 and $230 billion for 2007. Beyond this year, researchers estimate online retail sales will continue to grow at the rate of 20 percent per year through 2010. “The online environment is maturing, and online buyers have become more savvy about finding free shipping and deeper discounts,” said JupiterResearch analyst Patti Freeman Evans.

Ecommerce researchers found that approximately 50 million American businesses and households currently have broadband access, and three-quarters of American adults surf the web on a regular basis. The top five categories of goods sold most often online include high-tech electronic and other IT related products (15%), followed closely by music, movies, books and videogames (13%). Clothing and related accessories represent 8% of online sales for the year, as did airline tickets and travel purchases. Sales of health and beauty products accounted for 7% of online revenues.

Staying Close to the Customer

To flourish in 2007, wholesalers and retailers must constantly diversify and expand their merchandise lines offered online. For instance, if you sell clothing, add jewelry and accessories. It is important to do your homework and constantly query your customers about what they like or dislike about your product line and web site functionality. You must satisfy your customers with good customer service, and also anticipate their needs, because there are many other places to shop online that are just a click away.