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Net sales up, no threat to stores

Net sales are expected to increase from last year, but online sales will likely account for a small amount of gift-buying receipts this season.

3 min read
In the grand scheme of things, online sales will likely account for only a small amount of gift-buying receipts this season.

But Net vendor sales are expected to increase significantly from last year, a sign of consumers' growing confidence in e-commerce. What is unclear, however, is whether the boom in Net sales is cutting into traditional mail-order revenues or actually fueling the catalog business.

Overall, it's hard to quantify online sales in part because retail sales made over the Net are not tracked as a separate category by the Census Bureau of the Commerce Department. Instead, online retailers are lumped into the mail-order category, which also includes venues such as the Home Shopping Network. The bureau's monthly retail sales reports encompass auto gasoline to grocery store gross receipts, but retailers usually monitor holiday sales just for general merchandise such as computers, apparel, and furnishings, known as the "GAF" category.

According the Census Bureau's monthly retail sales estimates, the GAF category accounts for $57.6 billion of the total $213.8 billion in sales for November. Last month's totals for mail-order sales aren't in yet, but for October they totaled $4.4 billion, up from $3.9 billion for the same month in 1996.

Some analysts say the increase in mail-order sales reflected by the Census Bureau will continue through the holiday season due to e-commerce.

The latest such report from Jupiter Communications projects that online merchants will sell $1.1 billion in goods and services this holiday season. Forrester Research and the Yankee Group calculated that the industry would make $800 million to $1 billion during November and December.

Jupiter's forecast is up about 28 percent from its holiday season estimate of $306 million in Net sales for 1996--which could account for the growth in the mail-order category. Jupiter's report also includes online grocery and travel sales.

"It sounds like online sales are making up a high percentage of those mail-order sales [in the Census Bureau reports]," said Jupiter analyst Nicole Vanderbilt. "It depends largely on the product segment, but as a general rule online sales are more than likely cutting into to catalog sales first over any other sales channel."

In order to formulate expectations for online sales, a few research firms review the past sales performance of some major Net shops, as well as the companies' own holiday sales estimates. But analysts often don't go back after the holiday season dust settles to report how much these companies actually raked in during November and December. An exception is Forrester, which went back to the online merchants it interviewed in April 1996 and this October and reported revenues of around $1 billion for last year.

The Census Bureau doesn't plan on counting online sales as a separate category any time soon, either.

Contrary to what some analysts are saying, mail-order industry associations say online sales are not cutting into mail-order revenues--rather, the Net is enhancing catalog companies' sales outlets.

"During the last five years, catalog sales also have grown at 7.5 percent per year," said Amy Blankenship, a spokeswoman for the Direct Marketing Association, citing a market impact study commissioned by the DMA.

If e-commerce is fostering growth in the mail-order sales category, she said, it's because catalog companies are doing both.

"The Internet provides another way for people to enjoy shopping at home as they do with catalogs. With Net sales, consumers are dealing with many of the same companies that sell through catalogs and brick-and-mortar stores," she said.

The National Retail Federation agrees.

"In general it makes sense that retail sales on the Net are getting bigger," said Pamela Rucker, vice president of public relations for the federation. "Catalog companies don't see the Net as a threat, they see it as an opportunity--it is simply another means of reaching consumers."

But Rucker said she thinks estimates for e-commerce are overblown, thus far.

"I don't know whether consumers are active enough to more than double the e-commerce sales estimates from last year. I would question those numbers," she added.