Report: E-Commerce and Web Grew Up in 2001

Economic realities forced e-commerce and the Internet to turn away from voracious growth and focus on long-term viability in 2001, creatinga slew of new challenges, according to a report released by Nielsen//NetRatings (Nasdaq: NTRT).

“The Internet is just like any other product that goes from entry to evolution in its product cycle,” T.S. Kelly, director and principal analyst at Nielsen//NetRatings and co-author of the report, told the E-Commerce Times. “It’s not necessarily a bad thing. It just means that there has to be a huge focus shift.”

The research firm said in the report that in addition to e-commerce, which saw growth slow considerably, the Internet itself saw fewer newusers and fewer users upgrading to broadband access.

Turning Point

The maturation came to a head on September 11th and afterward, when the Internet became a key channel for people to receive news about the terrorist attacks on the United States and to respond with donations.

“In one respect, everything sort of jelled on one day,” Kelly said. “And at the same time, you saw the same kind of process happening over a longer period. Certainly for e-commerce, things came together in the fourth quarter. Despite a dismal economy, people came online in huge numbers to shop.”

Fourth-quarter e-commerce numbers showed e-tailers faring far better than offline merchants, with growth of about 15 percent. U.S. government numbers pegged fourth-quarter non-travel sales at about US$10 billion and sales for all of 2001 at about $32 billion.

Nielsen//NetRatings also found that the Web was flooded with shoppers in the fourth quarter: Three out of every four surfers said they were doing at least some shopping online.

Happy Campers

There is another sign that online shopping has grown up. Holiday shoppers went away much happier than in previous years, and those who did have problems had a whole new set of complaints.

While past years were plagued by problems with sites crashing or denying access to shoppers, as well as missed shipments or problems with returns, complaints in 2001 focused more on product availability.

In 2001, fewer than 1 percent of shoppers reported problems with returns, 2 percent complained about orders not arriving on time, and 3 percent faulted unresponsive customer service. But 26 percent of shoppers said they could not find the product they wanted, either because the Web site did not carry it at all or because it was out of stock.

“Shoppers came with different expectations,” Kelly said. “It was more a case of a shopper going to a Macys.com or Walmart.com and looking for a specific product and finding it wasn’t in stock or they didn’t carry it online. It was more about finding products than about operations or fulfillment.”

Internet Inches Forward

Slow growth is a reality for the Web beyond e-commerce as well, according to the report. While broadband use grew 80 percent in 2001, Kelly sees obstacles to expansion of high-speed access, including high prices. The industry also has yet to develop an array of must-have content or applications that will drive adoption.

Streaming media is another area in which new focus is required. Kelly said companies that are successfully providing paid content may lay the foundation for the future.

He cited both CNN.com and MLB.com, the site of Major League Baseball, which recently hiked its price for access to streaming content in 2002, as models.

“They’re not waiting for the marketplace to catch up,” Kelly said. By charging for content from the start, they can use that revenue to scale content and technology to demand.

“The future looks like it will be based on a much more sober pay model, rather than advertising-driven offerings. We definitely don’t see streaming going away, but we do see more selectivity.”