e-Commerce Sales: Blossoming or Already in Bloom?

June 30, 2007  by in UnCategorized   

By Home Furnishings Business in Retail Technology on July 2007 No matter what report you read, e-Commerce sales are rapidly growing, including sales of home furnishings. And 2007 numbers promise to be even larger.

According to the U.S. Department of Commerce (DOC), 2006 e-Commerce retail sales were $114.2 billion, up from $87.8 billion the year before. Of that amount, Home Furnishings Business estimates $10.2 billion was spent on home furnishings, up 8.5 percent over 2005’s estimated sales of $9.4 billion.

For the first quarter of 2007, the DOC estimates retail e-Commerce sales, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $31.5 billion, up 18.4 percent over first quarter 2006 sales. That compares to an estimated increase of 3.2 percent for all retail sales.

Market research firm Forrester Research, in its study The State of Retailing Online 2007, projects online sales, including travel, will reach $259.1 billion in 2007, up 18 percent over 2006 sales of $219.9 billion.

According to the Forrester survey of 170 retailers, for the first time in history, consumers spent more on apparel, accessories and footwear in 2006 than they did for computer hardware and software. 2006 clothing, accessory and footwear sales were $18.3 billion, compared to $17.2 billion for computer products. Forrester projects online sales of clothing to reach 10 percent of all clothing sales this year.

Sales of autos and auto parts were next in line, with sales of $16.7 billion, followed by home furnishings at $10 billion.

“As consumers flood the Web to purchase merchandise and research projects, online retail is moving full speed ahead,” said Sucharita Mulpuru, Forrester Research senior analyst and lead author of the report. “This strong growth is an indicator that online retail is years away from reaching a point of saturation.”

As yet, online sales of home furnishings represent only a tiny portion of total U.S. sales of the category. In 2006, the DOC reported home furnishings sales of $404.6 billion, up 7.3 percent over sales of $377.2 billion in 2005. Figures from the DOC include home furnishings products excluded from Forrester’s home furnishings category, such as consumer electronics.

Why are online apparel retailers at the forefront?

“Apparel retailers have overcome a number of hurdles to encourage shoppers to buy clothing and accessories online,” according to Scott Silverman, executive director of Shop.org, the network for retailers online. “Retailers are doing such a great job online that in some cases it’s easier to find and buy clothing on the Web than it is in a store.”

According to the Forrester report, many apparel and accessory retailers are integrating new technologies onto their sites, including rich imaging, where customers can zoom and rotate merchandise or see the item in different colors before buying, all of which eases the mind of a customer who is hesitant to purchase apparel online.

Would such tactics work for the home furnishings retailer? Maybe. It’s a simple fact that it’s easier to package and return a blouse that was the “wrong blue” than it is to return a sofa or dining table. The complexities of delivering large items are vastly different than arranging for a vendor to drop ship shoes or even a lamp.

The Forrester study indicates that e-Commerce is coming of age, as profitability throughout the sector has stabilized. According to the report, 83 percent of respondents to the survey were profitable, with 78 percent reporting they were more profitable than in 2005. Apparently gone are a lot of the “e-tailers” of the late ‘90s who based their success on the number of site visitors rather than making money.