Shop.org on the State of Online Retailing

A conversation with Scott Silverman, Executive Director, Shop.org

eStara: Each year, Shop.org conducts a study on the “State of Online Retailing.” Last year’s results found that online retail grew by nearly 25% in 2006. In your view, what are some of the drivers behind this growth, and what are your predictions for future growth?

SS: There are a variety of growth drivers, including:

1. More people are shopping online;
2. Online shoppers are using the Internet to do more of their shopping, including in non-traditional e-commerce categories such as cosmetics, apparel, shoes and home furnishings;
3. Retailers are improving the online and multichannel shopping experience making is smoother and easier.

For 2008, we’re expecting more than a quarter trillion dollar in online sales, which is amazing. The growth of new shoppers must slow down eventually and this will affect the overall growth rate. However, there is considerable room for growth in the Internet influencing off-line shopping.

eStara: Despite the increase in sales, which you note in the study, the New York Times reported over the summer that online sales may be losing steam since growth had dropped sharply in certain key sectors, such as books, tickets and office supplies. What are your thoughts on this, and does the Shop.org study support this hypothesis?

SS: Online sales in 2008 will be $259 billion. It shouldn’t be a surprise that the growth rates are slowing down when the base is so large. That being said, it’s time to stop thinking about “online retail,” as its own industry and start thinking about it as part of the overall retail industry. Whether its online, catalog or stores — they’re serving the same customers. And, if there was any doubt that they are inextricably linked, look at some of the data about how online influences offline sales. According to JupiterResearch, in 2008, the Internet will influence nearly 600% more sales offline than it will generate online.

eStara: Regarding the influence of online research on offline sales, are you noticing any changes in how retailers are integrating e-commerce into their overall multi-channel strategies compared to the early days of e-commerce?

SS: The biggest change is that retailers are getting more serious about cross-channel shopping and are offering more multichannel shopping features such as the ability to redeem gift cards online or allowing customers to return online orders in the store. During the 2007 holiday season, it was interesting to see more retailers use Internet marketing to drive Black Friday shopping activity in stores. I expect that the results from these efforts will raise awareness among non e-commerce executives of the potential of the Internet in retail beyond online transactions.

eStara: How do you see the role of local search impacting the way national chains market to consumers, and distribute leads to stores?

SS: Local search is a huge untapped opportunity for retailers. How much commerce is prevented simply because someone looking to buy a something still doesn’t know where they can get it when they want it? If I’m home at 8 pm with a craving for a particular Spanish wine, wouldn’t it be great if I knew that there is a store 15 minutes from my house with a collection of Rioja that is also open until 9 pm? I haven’t yet seen local search applications that solve this problem.