Online Sales Inch Forward

A Commerce Department report released Wednesday showed online sales rising .2% from July to September.



Online U.S. retail sales grew in recent months--if only by a hair's breadth--while total U.S. retail sales declined. A Commerce Department report released Wednesday showed online sales rising .2% from July to September. And while that's not a landslide victory, it is an improvement over the previous three months, which saw a 1.8% decline. It also represents an 8.3% increase compared with online sales in the third quarter of last year. Total retail sales shrank 2.6% to $787 billion.

Toysrus.com is one online retailer that enjoyed a healthy third-quarter increase this year. Its online sales from early August to early November--which includes revenue from Toysrus.com, Babiesrus.com, and the recently launched Imaginarium.com--totaled $39 million, compared with $23 million for the same period last year. Babiesrus.com and Imaginarium.com (an educational-product store) help balance the seasonality of the toy business, where the last eight weeks of each year still comprise close to 70% of sales for some toy retailers, says Jeanne Meyer, VP of corporate communications for Toysrus.com.

But online sales still comprise only a fraction of total sales for most businesses; Meyer estimates Toysrus.com represents about 5% of all Toys"R"Us Inc. U.S. sales. And the overall average is much lower, says Yankee Group analyst Paul Ritter. For the fourth quarter, Yankee Group projects $9.5 billion in U.S. online sales--a 7% increase over last year, but still only about 1.2% of the total retail sales Yankee Group is predicting. For that reason, many businesses still don't consider online efforts a strategic priority, says Ritter. He frequently speaks with companies that doubt the benefit of online retailing, especially when its revenue seems so marginal.

But those companies are missing the point, says Ritter. Smart retailers know the key to success is integrating online channels with brick-and-mortar--allowing stores to accept returns from online shoppers, for instance. Says Ritter: "In discussions we've had with retailers, we've learned that customers who shop across multiple channels represent as much as eight times the revenue of customers that only shop though one channel."

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