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Online shoppers - wooed by new sites like Gap Inc.'s shoe site piperlime.com, enhanced merchandise images and such come-ons as free shipping - spent more on clothing and accessories than on computers for the first time ever, according to an annual industry study released Monday.
Online sales of apparel, accessories and footwear reached $18.3 billion last year and should hit $22.1 billion this year, according to the Shop.org survey conducted by Internet research firm Forrester Research. Shop.org is the online arm of National Retail Federation, the retail industry trade group.
Meanwhile, computer hardware and software, long the leader for nontravel online sales, moved into second place last year, at $17.2 billion. That was followed by sales of autos and auto parts, whose sales reached $16.7 billion, and home furnishings, which posted sales of $10 billion. Computer peripherals, which reached $1.5 billion in sales last year, were not included in the hardware and software category.
The figures were based on responses from 170 online retailers as well as an analysis of industry data.
"This is a real milestone in the industry," said Scott Silverman, executive director of Shop.org, noting that the popularity of apparel online is now in line with what's happening on land. "We have really gone mainstream."
Silverman and Sucharita Mulpuru, senior analyst and lead author of the report, noted that new technology that mimics shopping at physical stores such as the ability to mix and match clothing and zoom in on a pattern has faciliated online shopping. Furthermore, a growing number of apparel sites are now adding customer reviews, which help shoppers in their decision making.
A bevy of new shoe sites like piperlime.com, which offers free shipping on returns, is also providing a boost to the online footwear business.
Overall, online sales including travel rose 25 percent to $219.9 billion last year. Excluding travel, e-commerce rose 29 percent to $146.5 billion. For the current year, online sales including travel are projected to rise 18 percent to $259.1 billion. Sales excluding travel should reach $174.5 billion in 2007, or a 19 percent gain.
The study reported that 10 percent of all clothing, accessories and footwear sales are expected to occur online this year, up from 8 percent last year. And overall online retail sales excluding travel should account for 7 percent of the total retail market in 2007, up from 6 percent.
Still, the study noted that the top challenges to even greater growth include the delay between ordering and receiving most products and the fact that consumers often need to physically see an item before buying. While several merchants have rolled out the ability to buy online and pick up the merchandise at a store, few have succeeded in making this a seamless process. In many cases, stores will call back with availability more than 24 hours after the order was placed, negating the program's goal of giving shoppers immediate access to the merchandise, according to the report.
The report also noted that profitability throughout the sector stabilized. Eighty-three percent of respondents to the survey reported profitability and 78 percent said they were more profitable than in 2005. Profit as a percentage of revenue did not change because revenue and expenses rose as well, according to the report.
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