Online retail gets another spending forecast boost

March 10, 2010

Forrester forecasts double-digit growth for online retail in the US and Western Europe

Despite entering a more mature phase in its evolution, online retail in both the US and Western Europe remains poised for a robust period of double-digit growth over the next five years, according to two new forecasts by Forrester Research.

It said US online retail will grow at a 10% compound annual growth rate (CAGR) over the next five years to reach nearly $249 billion (£165bn) by 2014. Online retail within the largest European Union nations in Western Europe will grow at an 11 percent CAGR over the same period, hitting €114 billion (£104bn or $156bn) by 2014.

"Much of the overall retail sector's growth in both the US and the EU [European Union] over the next five years will come from the internet," said Forrester research vice president and principal analyst, Sucharita Mulpuru. "To maximise that growth, e-commerce professionals will have to help enable a multichannel strategy that responds to consumers' increased desire to hop between the offline and online worlds and their increasing mobile and social behaviours. The retail innovators over the next five years will demonstrate customer enablement across all touchpoints, not just via a PC-based web browser."

Despite consumers' increasing use of the web to research products before purchasing, most retailers fall short on offering a seamless cross-channel experience. According to Forrester's data, while 82% of US online consumers are satisfied with buying experiences that began and ended in a store, satisfaction dropped to 61% for consumers who began their research online and purchased in a store.

Large growth potential still untapped

The Forrester online retail forecasts for the US and the EU include business-to-consumer sales excluding auto, travel and prescription drugs. The EU forecast encompasses 17 Western European nations and includes a country-by-country breakdown of online retail across the seven largest markets: France, Germany, Italy, the Netherlands, Spain, Sweden, and the UK.

Characteristics of the Western European online retail forecast included increased online tenure, improved access, and greater promotion by retailers, which will drive the number of online shoppers in Europe from 141 million in 2009 to 190 million by 2014. The average spend per online shopper will rise from €483 (£434 or $661) in 2009 to €601 (£546 or $822) in 2014. And books, event tickets, and clothing were the top three categories purchased online in the majority of Western Europe.

Among the three largest EU markets, online retail will grow at a 10% CAGR over the next five years in the UK; 9% in Germany; and 13% in France.

"There is a clear divide between the countries of Northern and Southern Europe regarding online retail adoption," said Forrester Research vice president and research director Patti Freeman Evans. "While nearly half of UK residents regularly make a purchase online, a mere 10% of online Spaniards and 11% of online Italians do so today. Still, with compound annual growth rates approaching 20% in markets like Spain, emerging European e-commerce markets are poised for a vigorous period of growth."