In many ways, 2001 proved to be an extremely interesting year in the development of the Internet. The demise of over 800 dot-com companies since 2000 and the evaporation of absurdly overblown New Economy hype fueled by stock analysts has finally created a reasonable environment to more accurately gauge the future for e-commerce.  

In this column, we  take a look at the realities of e-commerce in relation to what users are actually using the web for during their Internet sessions. While there is no doubt that e-commerce will continue to grow, it currently represents a very small portion of overall retail revenues in the United States. The real story is found in how consumers are using the Internet to research, shop and compare products before buying. 

Prioritizing Expenditures
Internet and technology research data receiving the most coverage has for the most part been driven by for-profit companies who have a vested economic interest in the very Internet and technology business sectors they forecast. Similar to the wildly optimistic e-commerce predictions from stock analysts, many market research company e-commerce predictions have been accepted at face value because there was simply not enough historical data to affirm or refute these assertions.

While estimates on total online or e-commerce sales abound, rarely do they present much information on how those sales compare to traditional, or offline sales. Some context helps put those “500% increase in e-commerce predicted” headlines in some perspective. SW Communications believes this context is very important for small to medium size business and organizations. Often, these entities are trying to develop web sites on tight budgets and need to know how to prioritize site development expenditures.

E-commerce and Overall Retail Sales
U.S. Census data on Retail Trade and Food Service estimates e-commerce sales for 2001 to total $32.6 billion, an increase of over 19% from 2000. In comparison, estimates for total retail sales in 2001 are $3.18 trillion, indicating that as an overall percentage of retail sales, e-commerce activity is roughly 1% of sales.

According to the Direct Marketing Association’s 2001 State of The Catalog Industry Report, catalog/direct mail companies report about 13% of their overall sales come from the Internet.

It is difficult to obtain numbers comparing online sales as a percentage of overall sales for individual retailers. The public financial reports of the top five internet retail clothing sites (Old Navy, Gap, Victoria's Secret, Lands End and Silkies) and the top five internet department store sites (Walmart.com, Target.com, Sears.com, JC Penney sites and Bluelight sites{Kmart}) as reported by Jupiter Media Metrix do not reveal a distinct sales or revenue number attributable to online sales during 2001. Yet, for the most part, these companies are well-known retail establishments with physical locations designed to serve shoppers. During the last quarters of 2000, and the first quarter of 2001, over 75% of the best Internet performers were the web sites of traditional retailers. 

So, why have these retailers developed web sites when they have stores to serve consumers?  

What are Consumers doing Online?
The Pew Internet and American Life Project is a non-profit initiative of the Pew Research Center for People and the Press, sponsored by The Pew Charitable Trusts. This ongoing, unbiased research project presents impeccable credentials and methodologies gauging the impact of the Internet on children, families, communities, the work place, schools, health care and civic/political life.
In this research, of the five most popular online activities, four are about search. Users are searching for information — answers to specific questions, on products or hobbies and driving directions. Overall, nearly 60% of the most common online activities are focused on finding information.
In fact, between 2000 and 2001, Internet users report a 30% increase in their use of the Internet to research products or services before buying and a 45% increase in actually using the Internet to conduct a purchase transaction.  

Conclusion
So, with an Internet presence and a physical location, retailers reach customers both ways. On the web, consumers can, in essence, shop for information about a company's product or service, conduct product comparisons and make the choice to buy online or to visit the store.
Whether you are considering improvements to an existing web site or developing a new web presence, this makes it clear that delivering easy to use, searchable product and service web content to allow customers to shop for information is critically important. Depending on your product or service, enabling your site visitors to actually purchase those products online may not be as important for your business in this early stage of real world e-commerce.  

Resources
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• U.S. Census Bureau, Electronic Commerce
• U.S. Census Bureau, Retail Trade and Food Services
• Direct Marketing Association
• Jupiter Research/comScore MediaMetrix
• Shop.org
• Pew Internet and American Life Project