How Big Is E-Commerce?

Different experts might define e-commerce differently, but most agree on one thing: The sector represents a growing piece of the overall commerce pie, and its share is expected to increase steadily — though gradually — over the next five years.

For example, Forrester research director Kate Delhagen told the E-Commerce Times that online sales accounted for US$51.3 billion in revenue during 2001. Revenue for 2002 is expected to total $72.1 billion, a 41 percent increase over last year, she added.

Indeed, online commerce has continued to gain momentum this year despite an overall weak economy, coming off a woeful year for retailers in general.

“Last year was a bad year for commerce as a whole,” Delhagen said. “There was September 11th and a number of other factors.”

Gaining Momentum

The resilience of the e-commerce sector in tough times supports the argument that it could become a larger force in the future, even though it currently represents just a small percentage of overall retail revenue.

According to Forrester figures, overall retail sales — online and offline — totaled $2.16 trillion in 2001, meaning that e-commerce captured 2.4 percent of the total take. In 2002, e-commerce’s share is expected to come in at 3.2 percent of a $2.25 trillion total.

“The size of e-commerce has grown in terms of its share of the overall pie,” Delhagen said, adding that this trend is likely to continue over the next five to 10 years as new customers swell the ranks of online shoppers.

Moves to improve quality assurance and ease fears about transaction-related security also will help boost e-commerce, according to Delhagen.

Add and Subtract

Not all research firms measure e-commerce in the same way. Forrester’s tallies include revenue gleaned from travel services and auctions, in addition to straight sales of physical goods. However, the company’s numbers do not include financial services, such as commissions and fees paid to online stock brokerages or mortgage lenders.

In contrast, Giga Information Group takes such fees into account in its forecasts, although the size of stock trades, loan amounts and similar numbers are not counted.

But while Giga’s base numbers might differ from Forrester’s, all signs still point to e-commerce’s continuing growth as a revenue force.

According to Giga vice president Andrew Bartels, online sales of goods and services totaled $60 billion in 2001, putting e-commerce at about 2 percent of overall retail spending.

Giga has predicted that this share will grow by about three-tenths of a percentage point each year through at least 2005, marking a slow but steady climb.

As for e-commerce sales, Bartels told the E-Commerce Times that preliminary Giga projections estimate that online revenue will total about $90 billion in 2002 and eventually will reach $160 billion to $170 billion in 2004.

Capturing New Markets

Experts also noted that e-commerce’s future growth depends in part on capturing a larger share of sales in areas where the online channel is just starting to gain a foothold.

For example, most car-buying transactions that begin online currently are completed at an offline dealership, but this pattern could change as online shopping becomes more ubiquitous.

“Auto sales are unusual in that one cannot buy a car 100 percent online — in the U.S. at least,” GartnerG2 senior analyst Michael Cruz told the E-Commerce Times.

With car sales factored in — the research firm includes any online transaction in which a commitment to purchase is made, even if funds do not change hands at the time of the transaction — GartnerG2 has predicted total e-commerce revenue will increase from $88.2 billion in 2002 to $287.9 billion in 2006.

Strong Starts

Online auto sales, for example, are expected to total $17.4 billion in 2002, rising to $91.8 billion by 2006, according to GartnerG2. In comparison, the research firm noted that online car sales totaled just $6.6 billion in 2000.

Forrester’s Delhagen said e-commerce already has established a foothold in other product areas. Its current top stronghold is computer hardware and software, where it is expected to capture 17.9 percent of all sales in the category for 2002.

Delhagen said the online channel also is seeing continued strength in book sales (11.1 percent of total book revenue), music and video sales (7 percent), travel services (6.3 percent) and event tickets (5.6 percent).