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Traditionally, the best time of year for retailers is the holiday shopping season in the fourth quarter. Consumers rush around spending like crazy on everything from gifts to decorations to cookie dough. But surprisingly, a new segment of the retail industry actually did better in the first quarter this year than it did in the fourth. According to new figures from the Commerce Dept., online sales of goods rose 1.2% in the first three months of the year, to $5.3 billion, vs. $5.2 billion the previous quarter.
True, the statistics must be viewed with some degree of caution. They're only the second release in a new series of government data. Plus, they don't include online sales of event tickets, financial products, or travel services -- three key areas of online purchases. That's because companies that sell those products are considered to be traditional retailers in the survey the government now uses.
But the e-tail sales figures do show that e-commerce, while still in its infancy, seems to have upward momentum, while total retail sales last quarter followed their typical declining trend. First-quarter sales totaled $747.8 billion, 8.9% below the $821.4 billion sales in the final quarter of 1999. "Online retail purchasing is not merely or primarily an end-of-year holiday phenomenon," says Commerce Under Secretary Robert J. Shapiro.
EAGER ECONOMISTS.
For the economy as a whole, e-tail sales are still a very small part of total retail sales. In the first quarter, online sales made up just 0.7% of all retail sales. That's up from a revised 0.63% in the fourth quarter of last year -- though just barely. "We know online sales will become a bigger part of retail sales, but it will take years," says Mark Vitner, economist at First Union Capital Markets Group in Charlotte, N.C. While the growth of online retail outlets is exploding, as is consumer traffic to those sites, most consumers still end up making purchases at shopping malls and stores.
In addition, because the government's data are so new, Commerce officials say it will take figures from several quarters to fully understand the e-tailing trend. And since the government hasn't decided yet how to categorize this new subset of retail sales, it's hard to say which products boosted sales in the first quarter. All that makes analyzing the figures somewhat difficult. But already, economists are eager for the next installment of this new series, expected sometime in August.
While the government won't provide forecasts for the next set of figures, private researchers are looking for online sales to multiply in the coming years. ActivMedia Research, an online research firm in Peterborough, N.H., says total business-to-consumer sales will soar to $666 billion by 2005, from $108 billion this year. But ActivMedia's estimate seems high because it uses a broader definition of online sales than the government does, including items such as airline and event tickets.
Says Harry Wolhandler, ActivMedia's vice-president for research: "Over time, consumers will learn to rely on the Internet for more items." If that forecast turns out to be right, then some day e-tailing may be the dominant force in the retail industry. By then, e-tailers may have the same complaint that traditional retailers now have: After Christmas, business drops off.
By Laura Cohn in Washington
EDITED BY DOUGLAS HARBRECHT
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