Internet Retailing Is Growing Into a State of Maturity

Times Staff Writer

The good news for electronic commerce is that it isn’t just for tech-savvy shoppers anymore. The bad news is that e-commerce merchants are now at the mercy of the same economic factors that are battering traditional retailers.

Online sales in the third quarter totaled $17.9 billion, according to a report this week from ComScore Networks Inc., a market research firm in Reston, Va. That’s just a 2.3% boost from the previous three-month period, and summer is traditionally a slow time for retail. Last year, autumn sales were 6.4% higher than summer sales.

Those figures suggest that e-commerce is reaching a plateau -- and that growth will be more difficult to come by. To make matters worse, analysts say that online merchants are unlikely to outperform general retailers in what is expected to be a less than stellar holiday season.

“In the early years, the online shoppers tended to be a lot more tech-savvy,” said Michelle David Adams, vice president of retail at ComScore. “Now online shopping is much more mainstream. Online consumer shopping has become a very, very strong predictor of consumer shopping as a whole.”


After years of triple-digit increases, e-commerce growth is slowing in year-to-year comparisons. First-quarter sales for 2002 were 48% greater than in 2001, while second-quarter sales rose 40% and third-quarter sales grew by 35%.

No longer able to rely on novelty for continued growth, major online retailers are now trying to mine territory they had previously dismissed as too challenging. For example, industry bellwether Inc. is putting the finishing touches on a plan to open a virtual store to sell clothing.

The Seattle-based company would not comment on the venture, which has been anticipated since the summer. But Kate Delhagen, retail research director for Forrester Research, said she has been told by participating merchants that the launch is imminent so that Amazon can reap the benefits of holiday shopping -- such as they may be.

“Amazon has been making a very predictable march across all retail categories,” Delhagen said. “First came the easy-to-purchase online items like books and CDs and in the next wave came heavier, more problematic things such as home electronics.”


But selling apparel has been thought to be even a bigger challenge for online retailers. Total sales of clothing online are expected to rise to $5.2 billion this year from $4.4 billion last year, but they will still represent only about 2% of all clothing sales, according to Forrester Research.

“It’s extremely complicated,” said e-commerce consultant Lauren Freedman, president of the E-tailing Group in Chicago. “It’s highly seasonal, very diverse and subject to trends. You can have a big hit one year and the next you have a dog.”

What’s more, offering a complete line of clothing is practically impossible.

“In electronics, you can get together with Circuit City and that covers 80% of the kind of items in demand,” Freedman said. “No one clothing chain covers nearly that much of the category.”


Rather than sell clothing itself, Amazon will partner with existing online merchants such as Lands’ End, which said Wednesday that it has been involved in tests for the venture. Published reports have named Gap Inc. and Sears, Roebuck & Co. as other partners. Both declined to comment.

Still, Amazon has little choice but to pursue increasingly difficult categories. It often has stated it will grow by offering an ever-increasing variety of items.

That’s important because as the number of online shoppers grows, the average amount each of them spends declines. The number of households shopping online during the all-important holiday season is expected to reach 36.5 million, 4 million more than last year, according to Forrester. But the average amount spent per person is projected to fall by $30 to $433.

Delhagen said the time for selling clothing online has come, due mostly to increased sophistication of marketing and online tools.


“In the early days, it was hard to see exactly what you were getting when you looked at the sites,” she said. As for fit, customers could only guess. Through trial and error, Lands’ End and Eddie Bauer have learned how to successfully present clothing on the Web.


Times staff writers Abigail Goldman and Leslie Earnest contributed to this report.