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Online spending to hit $65 billion

Dot-coms may be dropping right and left, but consumers will boost online retail sales to some $65 billion in North America this year, a study says.

Dot-coms may be dropping right and left, but consumers are still looking to the Web, according to a new study that says online retail sales are expected to reach $65 billion in North America this year.

The study, conducted by industry group Shop.org and the Boston Consulting Group, found that online spending should increase 44 percent from 2000. Excluding financial brokerage sales, which had been included in earlier studies by the group, business-to-consumer sales grew 66 percent in 2000 to almost $45 billion.

It's not the first sign that consumers are continuing to spend online. A recent report from the Department of Commerce found that consumers increased spending online 36 percent in the fourth quarter of last year, compared with the third quarter. That report found that online sales in the fourth quarter were $8.7 billion, more than 1 percent of total retail sales.

Although the number of dot-coms shrunk considerably since a year ago, those remaining have managed to shore up their finances somewhat, the study found. For 2000, operating losses decreased to 13 percent of revenue, down from 19 percent in 1999, in the companies surveyed.

And some have even managed to break through the red ink, although the more the companies rely on the Web, the tougher things are. The study, which surveyed 550 retailers, found that 72 percent of catalogers, 43 percent of brick-and-mortar companies, and 27 percent of Web pure-plays were profitable on an operating level.

Online retailers have cut back on spending, especially in marketing, which may have helped them move closer to profitability. The study found that customer-acquisition costs for all online retailers fell from an average of $38 in 1999 to $29 last year. The costs are still higher for Web-based retailers, where customer-acquisition costs dropped from $82 to $55 during that period.

Travel, the largest category of online spending, is expected to grow 50 percent in 2001 over the $13.8 billion reached in 2000. But spending could level off in other categories: books should grow only 25 percent, and computer hardware and software is expected to grow only 15 percent.