Numbers of retailers online, planning Web sites increasing

Consumers buying more on Internet than they did last year

January 20, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

NEW YORK -- As more consumers turn to the Internet to shop for everything from toys to sweaters, retailers are scrambling to keep up, with the percentage of companies selling or planning to sell online more than doubling in the past year, consulting firm Ernst & Young said yesterday.

Of retailers surveyed by the firm in its second annual look at retail's emerging frontier, more than three quarters said they are working to build an electronic presence or launch World Wide Web sites, up from 34 percent a year ago.

Those selling on the Web -- in what is expected to be a $13 billion market this year -- jumped to 39 percent from 12 percent.

At the same time, consumers are buying more often and spending more online than they did a year ago, with more than half the shoppers making at least five purchases, up from 17 percent. More than a third said they spent $300 or more.

The findings dispelled notions of all Internet shoppers' being young and technologically savvy, said Stephanie Shern, vice chairman of Ernst & Young, who unveiled the findings yesterday during the National Retail Federation's annual convention and expo.

"There is no one profile for the online shopper," she said, although shoppers tend to be better educated and wealthier than consumers in general.

Retailers reported that online sales represented about 1 percent of revenue for the past fiscal year -- though they expect the share of Internet sales to rise to 9 percent by fiscal year 2001.

Though many retailers have yet to turn a profit from online operations, the long-term benefits will likely far outweigh initial costs, said David A. Bolotsky, a managing director with Goldman Sachs & Co.

"There's a land grab going on now," he said, comparing retailers' Web sites to initial forays into the outskirts of populated areas, where growth is expected. "The market is very much there."

Retailers that have built loyalty to their brand have an advantage over less familiar names and can actually increase market share -- rather than losing store sales -- by selling online, he said.

Still, he said, "It's going to be customer service that distinguishes companies online."

"We don't view the Internet as cannibalization," said Kent Anderson, president of Macys.com. "We look at it as an opportunity for growth. We see it as a way to increase sales to new markets without having to make the investment in new stores."

Nordstrom takes a similar view, said Bob Schwartz, general manager of the Internet for Nordstrom Inc.

"The biggest concern is losing market share from other people," he said. "If you don't open that store online, you'll be eaten by your competitors."

Online sales of books, clothing and music shot up, the survey showed, with clothing sales rising from 10 percent to 21 percent in a year and music sales up to 21 percent, from 6 percent a year ago.

Macys.com, for one, saw its online sales rise dramatically during the crucial fourth quarter -- some of which came from the 29 states where Macy's has no department stores, Anderson said, though he would not disclose sales figures for the department store chain.

"We saw explosive growth with a concentration in the kinds of products categories that just a year ago were considered Internet unfriendly" -- certain types of apparel, such as bathrobes and pajamas, and home products.

Though ready-to-wear apparel has not taken off in a big way yet, improved technology that will give consumers better ideas of how clothing will look and fit should in the future drive up sales of that category.

"I don't think you can discount the convenience of the Internet," he said.

Smaller chains, too, have found a similar urgency to launch and improve Web sites.

Ocean City-based South Moon Under, a five-store chain of apparel and swimwear, launched its first Web site less than a week ago. "It's a learning experience for all of us," said Amy Jerns, a visual merchandiser for the chain. "But it's the wave of the future, and we want to be there."

The Ernst & Young survey found that though shoppers are attracted by savings, variety and convenience, many still feel uncomfortable with online purchasing. Ninety-seven percent of those surveyed who had never shopped online said they felt uncomfortable sending credit-card data across the Net.

That should be a nonissue, said Robert L. Smith Jr., executive director of shop.org, an organization of online retailers based in Silver Spring.

"Consumers still have misconceptions about it," he said yesterday during the retailers' conference. "We as an industry have to do a better job of making consumers aware that putting credit card [data] on Web sites is as safe or safer than giving it to a store."

Pub Date: 1/20/99

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