April 19, 2005

The e-commerce industry is now ten years old, and amounts to about $140 billion a year in business. Gone are the days when e-commerce sites crashed and online retailers "burned through" investors' capital.

Today, Internet retailers offer a stable shopping environment, and many are showing a healthy profit margin. At the same time Internet users are becoming more sophisticated in utilizing multiple shopping channels to research and buy products.

In its new report, E-Commerce in the US: Retail Trends, eMarketer briefly reviews what has happened over the decade since the first online purchase and looks ahead to the future of e-commerce.

"The demographic profile of the online shopper has evolved since the early days of online shopping," says Jeffrey Grau, eMarketer Senior Analyst and author of the report. "In its infancy online shopping was the purview of well-educated, high-earning, 20- and 30-year old single, white males. Today online shoppers closely resemble the US population as a whole."

Forrester Research captured the changing demographic profile of the online shopper in two years worth of recent data. Between 2003 and 2004, the average online shopper became a year younger, was more likely to be female, less highly educated, with slightly lower household income, and increasingly accessed the Internet through a broadband connection.

"Online shopping is one of the most popular Internet activities and online buying one of the fastest growing Internet activities," says Mr. Grau.

According to A Nation Online: Entering the Broadband Age, a September 2004 report from the US Department of Commerce, National Telecommunications and Information Administration (NTIA), searching for product/service information is the second most popular online activity after e-mail or instant messaging.

In 2003, 76.5% of Internet users ages 15 and over indicated they researched products online. Meanwhile, the fastest growing Internet activities between 2001 and 2003 were purchasing products/services and banking online — both transactional activities. Product purchasing increased by 8 percentage points from 44.1% to 52.1% while banking online grew by 10.4 percentage points from 17.4% to 27.8%.

"Online retailing has arrived as a profit engine with double-digit operating margins because retailers have found the right balance between selling a product, acquiring and retaining customers, and earning a profit," says Elaine Rubin, Chairman of Shop.org.

The e-commerce landscape, once dominated by Internet-only retailers, is now a mix of online and traditional retailers' Web sites.

The presence of comparison-shopping sites, such as Shopping.com, Yahoo! Shopping and Shopzilla among the top retail Web properties, as reported by comScore Media Metrix, is evidence that consumers are using the Internet to compare products and retailers.

Source: eMarketer