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Forrester Research US eCommerce Forecast: Online Retail Sales To Reach $329 Billion By 2010

Cambridge, Mass., September 19, 2005 . . . The second decade of eCommerce will be marked by innovations that will make online shopping easier and more engaging. This will boost US online retail sales from $172 billion in 2005 to $329 billion in 2010, according to a new forecast by Forrester Research, Inc. (Nasdaq: FORR). The increase translates to a solid 14 percent compound annual growth rate over the next five years.
Relying on new online shoppers to drive sales brings only limited opportunity; more and more mainstream consumers have already migrated to the Web. Instead, retailers are investing newfound profits in emerging technologies, such as sophisticated analytics and personalization tools, that enhance the online experience for existing consumers. The result: Businesses no longer view the Web as a low-cost sales channel but as a way of improving customer service and retention.

Online Stock Market Trading "Businesses are debating their online strategy. Many believe that they became too focused on sales. Now they're looking at their Web sites as a way to drive in-store traffic and increase their engagement with customers," says Forrester Research Vice President Carrie A. Johnson. "This is a huge shift in philosophy as eCommerce enters a more sophisticated phase. But it's also creating tension as CEOs demand ROI for expensive Web sites with hard-to-define metrics such as loyalty and brand."

- Online retail sales will grow from $81 billion in 2005 to $144 billion in 2010. The Internet will influence nearly half of all retail sales in 2010 (compared to 27 percent in 2005). By 2010, 71 percent of online users will use the Internet to shop compared to 65 percent in 2005. In the words of Dan Muse of eCommerceGuide.com, “Seize the opportunity and integrate your offerings now.”

Stock Investing Course Companies that illustrate this new philosophy include Target, which is using its Web site to promote and brand its retail stores; Gap, which is launching redesigned Web sites that ease the check-out process; and Nike and Timberland, two manufacturers that are exposing online shoppers to the idea of product customization. All are being forced to become more innovative online because pure plays such as Amazon.com, drugstore.com, Blue Nile, and Newegg.com have raised the customer experience bar.

Jupiter Research forecasts that in 2004, U.S. online retail sales will reach $65 billion. " commerce, " explained Jeff Axelrod, Sales Manager at Netfirms. "We want to make it easy for our customers to take advantage of this online retail marketplace. Up until now, store has been daunting; but Netfirms Commerce Pro is easy to customize and it s installed with a single click."

Stock Market Game The Forrester report includes a five-year forecast (with graphic) that breaks out online sales across 15 retail categories, including travel. Some highlights:

- by as much as 86% in 2002, says Chief Executive Officer Jon Nordmark. ever holiday season for Internet retail sales. Online holiday retail sales in the U.S. are likely to surge to $26 billion this year, up 18% from a year ago, according to Jupiter Research, a unit of Jupitermedia Corp. digit increases. Meanwhile, the National Retail Federation projects total holiday retail sales will increase to $435.3 billion this year, up 5% from a year ago.

Stock Investing Game * eCommerce will represent 13 percent of total US retail sales in 2010.
* Travel remains the largest online retail category, growing from $63 billion in 2005 to $119 billion in 2010.
* General merchandise (all retail categories excluding auto, food and beverage, and travel) will top $100 billion for the first time in 2005.
* An increase in the number of women shoppers will contribute to 14 percent of jewelry sales moving online by 2010. Online sales of health and beauty products will grow at an annual rate of 22 percent.
* Twenty-nine percent of small appliance sales will migrate online by the end of the decade as a generation that grew up with Internet access begins to get married and attend weddings.
* Categories showing significant growth (growth above the overall 14 percent compound annual rate) include: apparel, consumer electronics, health and beauty, home products, food and beverage, and sporting goods.

Technological advances by the company have allowed for this new level of value adding in the highly competitive floral industry. According to Forrester Research, online floral sales are expected to reach $1.75 billion by 2008. During recent peak floral shipment periods, year floral sales growth, including a 25% increase in online flower purchases for 2006 Valentine¯ Day shipping period and a 16% increase this Mother¯ Day over the prior year.

Journal Prime Rate Street Wall The $329 billion represents a minor downward adjustment from Forrester's 2004 forecast of $331 billion for 2010. This is due to recent softness in overall consumer spending.

Then why are we so confused about what we need According to consumer industry tracker Packaged Facts, the 2004 U.S. skincare sales reached $6.4 billion and is expected to reach over $9 billion by the year 2010. If you consider all the skincare manufacturers competing for their share of the industry it's not surprising that we fall prey to the more prominent marketing hype and miss the actual research findings.

Stock Market News "US eCommerce: 2005 To 2010" is available to WholeView 2 clients and can be found at www.forrester.com.

Stock Investing Basics Forrester Research (Nasdaq: FORR) is an independent technology and market research company that provides pragmatic and forward-thinking advice about technology's impact on business and consumers. For 22 years, Forrester has been a thought leader and trusted advisor, helping global clients lead in their markets through its research, consulting, events, and peer-to-peer executive programs. For more information, visit www.forrester.com.

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