On August 17, the Census Bureau of the US Department of Commerce (DoC) released its second-quarter 2006 estimates of retail e-commerce sales. According to the new data, in the first half of 2006, US Web retailers sold $49.3 billion worth of products (excluding online travel and event tickets), representing a 24.2% rise over online sales in the same period last year.
Neither higher energy prices nor shrinking personal savings accounts are curbing consumer enthusiasm for online shopping. Particularly impressive is the fact that the sales gains reported for the first half of 2006 come on top of strong online sales last year.
A look at some of the largest Web retailers shows that not all of them are reaping rewards. Amazon, the world’s largest online retailer with 2005 sales of $8.5 billion, had sales growth of 20.9% in the first half of 2006 compared to last year, and PC Connections (ranked 33rd in the Internet Retailer Top 500 Guide) enjoyed a 50.5% sales increase over the same period. However, Overstock (ranked 18th by Internet Retailer) grew by only 7.4%.
Separately, comScore’s analysis reveals that the three online retail categories with the largest increase in sales in the first half of 2006 compared to a year ago were office supplies (54%), computer software excluding PC games (39%) and sport and fitness gear (38%).
A comparison of growth rates of total retail and online retail sales shows that the Internet channel is still growing much faster. While online sales grew by 24% year over year in the first half of 2006, total retail sales increased by only 7.4% in the same period. The jump in first half, year-on-year retail sales growth from 6.7% in 2005 to 7.4% in 2006 came largely from gas station sales (something that is not purchased online). Remove these sales and retail sales growth in the first half of 2006 dropped from 7.4% to 6.2%.
Some of the same highflying categories on the Internet are also doing well in stores. Sporting goods stores, for example, were one of the top growth categories, enjoying 13.3% growth. But some store categories are less fortunate. Retail sales at computer and software stores (close, but not exactly equivalent to comScore’s computer software category) fell by 3.5%, for example. Computer hardware and software is a popular online purchase and the poor store sales are partially due to consumers switching more of their purchases online.
The first half of the year generally accounts for around 45% of annual online sales, so the second half of the year, and especially the holiday shopping season (November and December), isvery important for all retailers. Based on the new DoC numbers, eMarketer has revised its 2006 retail e-commerce forecast slightly upward, even though slower growth is expected in the second half of the year. Online sales will reach $108.5 billion in 2006, a 23.2% gain over 2005. Overall, the future of Web retailing looks bright as consumers rely increasingly on the Internet to meet their shopping needs.