Taste Of Online Sales Gets Sweeter - InformationWeek

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Taste Of Online Sales Gets Sweeter

Consumer purchases online grow at three times the overall rate, but remain a minute percentage of overall retail sales.

Like many businesses, Z. Cioccolato concentrates on growing its core business, which is selling chocolates and other confectioneries to mostly tourists visiting its storefront between the trendy North Beach neighborhood and Chinatown in San Francisco, and not its Internet strategy.

Z. Cioccolato hasn't ignored the Internet completely: it sells 37 flavors of fudge online, though most of its 300 items can't be purchased over the Net.

Online sales surged last quarter, according to a just-released Census Bureau study. But like the chocolatier, Internet purchases represent a fraction of overall retail sales. American consumers purchased $21.1 billion in the second quarter, up 7.2% from the first quarter and 26% from the same period in 2004. As a contrast, overall retail sales approached $940.8 billion in the three months ended June 30, up 2.4% from the first quarter and 8.2% from a year earlier. Still, the growth rate of online purchases is three times as fast as overall sales.

E-commerce represents 2.2% of all retail sales last quarter. A year earlier, that percentage stood at 1.9%. Online's share of overall retail sales has been growing slowly but steadily. When the Census Bureau began tracking online sales, in the final quarter of 2003, 1.7% of all retail sales came online.

That doesn't surprise Z. Cioccolato's co-owner Michael Clark, an entrepreneur who also runs a business consultancy, Business and Beyond, which advises clients to mix online sales with its offline strategy. Clark sees stores like his shop slowly selling more goods online, but the lack of time and money impedes rapid expansion on the Web. It takes time to create the ancillary items to go with a transactional Web site, such as taking photographs and developing captions that accompany items to be sold. "The store has been in business 2 12 years, and we had to get the storefront successful first," Clark says. "For now, the Web is more of an add on."

But, online sales can prove lucrative to Z. Cioccolato and others. Clark estimates that as much as 20% of Z. Cioccolato 's sales could be generated from Internet sales if he and his partners work at it. Much of those potential online sales could come from customers who bought chocolate when visiting San Francisco, developed a taste for the sweets, and want more.

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