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2003 Music & Video Web Sales to Reach $3B

23 May, 2003 By: Joan Villa

Online sales of music and video products are expected to surge 27 percent, to $3 billion, in 2003, taking a 7 percent share of all music and video sales this year, according to a new report issued by online retail association Shop.org together with Forrester Research.

Although a sluggish economic climate has proved challenging to most retailers, sales at online merchants soared 48 percent in 2002, to $76 billion, and are expected to grow another 26 percent this year, to $96 billion, the report said.

Nine out of the 15 categories tracked in “The State of Retailing Online 6.0” study will sell 5 percent or more of their wares online, said Shop.org executive director Scott Silverman. Shop.org is a division of the National Retail Federation.

“The drivers of growth include consumer acceptance and familiarity with this mode of shopping, and so that's part of the cycle,” he said. “You'll find that consumers will begin their venture into online shopping with computer hardware, books, music or travel, and then get into apparel, flowers, gifts, sporting tickets, music videos, etc.”

More sites were profitable in 2002 versus the previous year, and the most successful e-tailers cultivated a “seamless shopping experience” spanning the Web and in-store sales, Silverman said. They improved customer service by permitting Web-bought exchanges and returns in-store, accepting gift certificates at both venues, and allowing customers to locate inventory and reserve products online first before driving to the store.

“Be there for the customer and make shopping as easy as possible for them,” he said. “That is the path to loyalty.”

Online sales are expected to reach 4.5 percent of total retail sales in 2003, up from 3.6 percent in 2002, the study said. But consumers will boost some categories well above the average. About 15 percent of all books and 34 percent of all computer hardware and software will be sold online this year, the study forecasted. On the growth scale, Silverman said online is in its “teenage years” with plenty of room to expand.

“Obviously, the whole music and video downloading [trend] could dramatically change the marketplace,” he added.

“If that becomes readily available, I would expect we'd see a dramatic jump in the penetration rate.”

The study also found that a surprisingly high number -- 40 percent -- of online customers are completely new to a retailer's business, Silverman said.

“It's a very encouraging statistic, particularly for the established retail brands in that they're finding that their online presence is a draw for attracting brand-new customers,” he said.

“There's a lot of skepticism that online sales are only a shift in sales from other places, so instead of making a sale in-store they end up making it online, and I think this quiets that skepticism.”

Overall, Forrester estimated that 36.5 million households bought online last year out of a total 105.5 million U.S. households. It expects another 6.8 million households to venture into online shopping by year-end.

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