Although last year’s global recession hurt many sectors of the business world, e-commerce was an area that that ended really well. Buyers around the world spent more than $600 billion dollars last year. This figure was a huge 68 percent increase from the previous year (2000). [International Data Corp (IDC)].
US Online Retail Sales
Historically, the fourth quarter of every year has largest number of online sales. This is usually due to the holiday season. Although, the September 11th attack initially affected online sales, the fourth quarter of last year came back stronger than ever. Here is a breakdown of online sales as estimated by the Department of Commerce for the last two years:
4th Quarter 1999 – 5.266 billion dollars
1st Quarter 2000 – 5.526 billion dollars
2nd Quarter 2000 – 5.982 billion dollars
3rd Quarter 2000 – 6.898 billion dollars
4th Quarter 2000 – 8.881 billion dollars
1st Quarter 2001 – 7.592 billion dollars
2nd Quarter 2001 – 7.458 billion dollars
3rd Quarter 2001 – 7.473 billion dollars
4th Quarter 2001 – 10.043 billion dollars
Total e-commerce sales for 2001 – 32.6 billion
Increase of e-commerce sales from 2000 – 19.3 percent
Sales usually increase in the United States during Christmas time and 2001 was no different. The Department of Commerce estimated that there were 34.4 percent more e-commerce transactions done during the fourth quarter of 2001 than there was during the third quarter. Furthermore, there was a jump of 9.5 percent in retail sales during the fourth quarter than there was in the third.
How This Affects Businesses
This increase of e-commerce spending coincides with how businesses are using their technology budget allocation. An AMR Research survey, as reported by CyberAtlas, showed that companies gained more confidence in e-commerce in the fourth quarter and increased their e-business budget by 9 percent rather than the 7 percent increase they reported for the 3rd quarter. Many companies are also spending more money on developing the skills of their internal staff rather than spending on outside consultants. During the fourth quarter of last year, approximately 18 percent of these companies’ budgets will be used to increase e-business staff and their training. This is a sizable increase from the 12 percent that was allocated during the third quarter. Furthermore, 72 percent of companies plan on increasing their spending on e-business, which was a jump from the 54 percent who were planning on it during the 3rd quarter.
So what are the online retail industries that are doing well? The big ones are travel, computer hardware, consumer electronics, and automobiles. No big surprise here. The travel industry accounted for a huge 40 percent of total online sales. The online computer hardware and consumer electronics sales started 2001 at 19 percent of total online sales and ended the year with 24 percent.
Regarding the auto industry, Forester Research found that automakers, dealers and independent sites are so interested in converting browsers into buyers that they have spent USD $1 billion dollars to make it happen.
The Forster Research survey also tracked 78,000 customers through 170 auto sites and found some interesting findings. We usually think of loyalty and repeat visitors as the way to achieve more sales. However, at least in the auto industry, this is wrong. A senior analyst at Forrester, Mark Dixon Bunger said:
“Common assumptions about customer behavior when shopping for vehicles online are wrong. For example, loyalty and repeat visits are actually an anti-predictor of purchase. Most people who buy come in short, intense bursts and don’t hang out on auto sites.”
Indeed, sixty-four percent of the auto-buyers finish doing their research in five sessions or less and one in four auto site visitors purchase their vehicle within three months.
US B2B E-commerce Sales
The recession, as well as the September 11th attack took a toll on B2B e-commerce. However, what seems to be obvious is that many of the larger companies are bouncing back because they see the Internet as a cost-cutting way to buy and sell goods and services. A January 17th, E-Commerce Times article reported that “45 percent of [US] companies that spend US$100 million dollars per year on supplies used the Internet to save money in the fourth quarter of 2001, up sharply from 28 percent in the third quarter.”
Many of these companies use auctions and business-to-business hubs. In fact, the number of companies who used auctions to buy and sell goods and services rose from 17 to 23 percent. Twenty-nine percent of companies involved with manufacturing goods used auctions. This is a rise from 21 percent the previous quarter. Regarding business-to-business hubs, over a quarter (26 percent) of the companies used them for their transactions in the fourth quarter.
It looks like more and more B2B companies see the value of using the Internet to save money. According to a study by Forester Research, 87 percent of business executives felt that it was “important” as a cost saving measure to buy and sell goods and services on the Internet. Furthermore, 53 percent felt that it was “very important” or “critical” to do the same.
In conclusion, although most of last year was rough for many companies doing e-commerce on the Internet, the last quarter of the year reflects the confidence of most business executives. It is good news for companies who have invested a substantial amount of money to create an e-commerce arm of their business. Hopefully, this growth among all facets of e-commerce will continue. If we can avoid the stupidity of unnecessary spending that helped start the downfall of many dot-coms, we can once again go back to the days of e-commerce being exciting and hugely profitable
Today’s article is an in depth investigation by Murdok’s very own Peter Thiruselvam. We’re proud of his latest work, and think it will be useful to our Internet community.
