Online Sales Shrink

Aug 30 2001

The already battered online retail sector was shaken further Thursday when the U.S. Department of Commerce reported that Internet sales fell during the second quarter both in absolute numbers and as a percentage of total retail sales.

Online sales fell to $7.46 billion in the second quarter from the $7.59 billion that was purchased online in the first three months of the year. The 1.8 percent decline is the second consecutive quarterly drop in online sales, though the earlier decline was in comparison to the seasonally strong fourth quarter.

Worse for the sector is the fact that online sales fell as a percentage of total retail sales, from 1.04 percent in the first quarter to 0.92 percent in the most recent quarter. The decline is a clear indication that the dizzying growth of Internet commerce in its early years has come to an end.

Still, online sales in the second quarter were up nearly 25 percent when compared to the same quarter in 2000, though that's a slower growth rate than the 37 percent year-over-year growth in the first quarter.

The figures suggest that "perhaps e-commerce sales have reached their plateau and growth from here will proceed at a more moderate rate," according to a report on Economy.com.

The numbers are bad news for a slew of struggling online merchants, including No. 1 Internet retailer Amazon.com, who have seen their rates of growth plummet in recent months.

The government has been reporting e-commerce sales since the fourth quarter of 1999, though a survey of 11,000 retailers. The figures do not include sales of airline tickets, one of the fastest growing online categories, event tickets or transactions at online brokerages.