Posted on: Wednesday, May 23, 2001

Expectations lowered for online retail sales

Bloomberg News Service

CHICAGO — Sales by U.S. Internet retailers won't grow as fast as expected in the next five years as the economy cools and companies such as Webvan Group Inc. struggle to sell food on line, Jupiter Media Metrix Inc. said.

The research company has reduced its annual sales estimates by 5.6 percent to 12 percent, with this year's forecast dropping to $34 billion from the $36 billion projected previously. That excludes travel bookings and sales of automobiles and prescription drugs.

Jupiter trimmed forecasts for online sales of groceries and furniture because of lower-than-expected demand, analyst Heather Dougherty said. Consumers didn't adapt to buying produce, meats and other food items on the Web as some companies believed they would. Online retailers also were unsuccessful in wooing people who wanted to touch and feel furniture before making purchases.

"There's been an obvious lack of success in that (online grocery) area," Dougherty said. "Growth will also slow a little bit as consumers scale back discretionary spending."

New York-based Jupiter expects $1 billion in online grocery sales this year instead of $2 billion, and said sales will rise to $7 billion in 2005, down from $18 billion previously projected.

Internet grocer Streamline.com Inc. ended operations in November, and Foster City, Calif.-based Webvan is cutting 885 jobs and has curtailed expansion plans because of continued losses. Peapod Inc., the Internet-grocery arm of Royal Ahold NV, earlier this month scaled back operations to five markets.

Living.com and Furniture.com Inc., which tried to sell furniture on the Internet, went out of business last year.

Internet sales, while lower than previously projected, will rise 42 percent from last year's $24 billion as more consumers become comfortable making purchases, Dougherty said.

The number of U.S. consumers who shop on line will increase to 79 million next year from 69 million this year, as buyers outnumber non-buyers for the first time.

"Online retailing is still alive and kicking," she said.

Jupiter revised spending projections for 2002 to $48 billion, less than the $52 billion previously projected.

In 2003, sales will rise to $64 billion, less than the $71 billion forecast previously. Sales in 2004 will total $83 billion, down from the $94 billion formerly projected. Sales are predicted to rise to $104 billion in 2005. Jupiter earlier forecast an increase to $118 billion.