Has online retailing entered the Dot Calm era?
Since the inception of the Web, online commerce has enjoyed hyper-growth, with annual sales increasing more than 25 percent overall, and far more rapidly in many categories. But in the last year, growth has slowed sharply in major sectors like books, tickets and office supplies.
Growth in online sales has also dropped drastically in diverse categories like health and beauty products, computer peripherals and pet supplies. Analysts say it is a turning point and growth will continue to slow through the decade.
The reaction to the trend is apparent at Dell, which many had regarded as having mastered the science of selling computers online but is now putting its PCs in Wal-Mart Stores.
The slowdown is the result of several forces. Sales on the Internet are expected to reach $116 billion this year, or 5 percent of all retail sales, making it harder to maintain the same high growth rates. Also, consumers seem to be experiencing Internet fatigue and are changing their buying habits.
“There’s a recognition that some customers like a more interactive experience,” said Alex Gruzen, senior vice president for consumer products at Dell. “They like shopping and they want to go retail.”
Still, Internet commerce is growing at a pace that traditional merchants would envy. But online sales are not growing as fast as they were even 18 months ago.
Forrester Research, a market research company, projects that online book sales will rise 11 percent this year, compared with nearly 40 percent last year. Apparel sales, which increased 61 percent last year, are expected to slow to 21 percent. And sales of pet supplies are on pace to rise 30 percent this year after climbing 81 percent last year.
Jupiter Research, another market research firm, says the growth rate has peaked. It projects that overall online sales growth will slow to 9 percent a year by the end of the decade from as much as 25 percent in 2004.
Early financial results from e-commerce companies bear out the trend. EBay reported that revenue from Web site sales increased by just 1 percent in the first three months of this year compared with the same period last year. And bookings from Expedia’s North American Web sites rose by only 1 percent in the first quarter of this year.
