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Retailers Have Room Grow Online Sales

9 Jul, 2014 By: Doug McPherson

NEW YORK – Even though most retailers have built strong E-commerce efforts, a new report from Moody’s Investor Services says most still derive a surprisingly small percent of their overall sales from online channels.

Online sales as a percent of total retail sales are at just 6 percent today, but will increase to 7.1 percent by 2016, and potentially reach the mid-teens by 2019. “Despite the apparent popularity of the Internet to the U.S. consumer, most retail sectors are still far from fully leveraging this potential,” the report says.

Highlights of the report written by Moody’s analyst Charles O’Shea include:

  • Online presence is a longer-term credit-positive for U.S. retail. A viable online channel is becoming more critical for brick-and-mortar retailers to maintain and strengthen their competitive positions. “Online sales are a cost-effective way to maximize physical locations and to leverage distribution capability,” O’Shea writes. “The successful development of this channel will ultimately be a credit positive for retailers.”
  • Mass store closings are unlikely as companies increase online presence. And there’s little evidence online growth is causing more retailers to close large numbers of physical store locations to save on unnecessary costs.
  • Extensive store networks give shoppers the option to see and touch the product that they may have researched online, which is one of the reasons store networks will remain a crucial link in the online logistics chain, the report finds. Points of distribution for ship-from-store capability will also remain important.
  • Online growth among retail sectors will vary widely. Some sectors have made tremendous strides in building a viable online presence, in particular the music, video and digital content group, which Moody expects will double its online sales penetration to 70 percent by 2016.

O’Shea adds that many companies don’t report their online business and that there’s not much consistency in actually constitutes an online sale. “We think these constraints suggest that the volume of online sales is actually larger than what available data sources suggest,” he writes.

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