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Industry Standard

Net steals billions from offline retailers

August 6, 1999
Web posted at: 11:21 a.m. EDT (1521 GMT)

by Maryann Jones Thompson
   Internet Economics

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(IDG) -- There's never been a question that online shopping steals purchases from offline retailers. The debate has been how many. Now, a new report finds that some 94 percent of Web shopping comes at the expense of offline retailing.

Jupiter Communications, a New York Internet research company estimates that, of the $11.9 billion consumers are projected to spend online during 1999, well under a billion, or some 6 percent, will be purchases that would not have been made in brick-and-mortar stores or through catalogs.
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And Jupiter forecasts that, as consumer e-commerce revenue rises to $41 billion by 2002, the portion of incremental sales will rise only to 6.5 percent - meaning the Web will be displacing over $38 billion in offline sales by that time.

Even though e-commerce accounts for only a fraction of U.S. retail sales today, Jupiter analyst Ken Cassar says these findings are a wake-up call for traditional retailers who have opposed investment in Web operations due to fears of cannibalizing offline sales. "Merchants must accept that cannibalized sales are better than lost sales," Cassar said, noting that vendors must work to combine the strength of their offline brand, distribution and customer base with an online business.

And for Net-only retailers, Jupiter says the low percentage of incremental buying means companies must work hard to retain current clients, as well as increase their share of each customer's spending, or risk losing them to other online retailers.

The report says that incremental buying online will be driven by the merchant's ability to target promotions effectively and will be most successful with impulse buys and products with a low price point.

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