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Saturday, February 16, 2008

The Growth Story Of The Online World

Every new development will have a hypergrowth period in its lifecycle. The online commerce world seems to be experiencing this right now. Look at the growth in recent times of online commerce and the answers would be self revealing. Clearly, the Internet is no longer a niche technology—it is mass media and an utterly integral part of modern life. If one looks around, it is obvious that almost no aspect of life remains untouched by online media. More than 85 percent of the world’s online population has used the Internet to make a purchase—increasing the market for online shopping by 40 percent in the past two years—according to the latest Nielsen Global Online Survey on Internet shopping habits. The study further adds, Globally, more than half of Internet users have made at least one purchase online in the past month.

Look at the datapoints here. Two years ago around 10% of the global population( 627 million) shopped online. Today the number has increased by about 40% (875 million). Books/Clothes/Shoes are seen as the fastest growing internet buys and "Visa" is seen as the most popular credit card payment method.Paypal is used by a quarter of the online shoppers.The highest percentage shopping online is found in South Korea, where 99 percent of those with Internet access have used it to shop, followed by the UK (97%), Germany (97%), Japan (97%) with the U.S. eighth, at 94 percent. More than 70 percent of Indians and more than 60 percent of Irish and UAE Internet users said they bought airline tickets/reservations on the Internet in the last three months. I had in the past written about the brisk pace of growth of online air ticket sales in India - this is a key benchmark for for how emerging economies having a fast growing online population would embrace online commerce.

Heady times all around right - No says Forrester. As the US economy makes its way through a difficult 2008, eCommerce companies will face hardship as they encounter significant cutbacks in consumer spending. Forrester anticipates that year-over-year online retail spending will reach its lowest point ever in 2008 — approximately 17%. Companies will do the best they can to mitigate the effect of the sluggish economy by embarking on initiatives such as international expansion, where the weak dollar may prove to be a boon. But most eBusiness professionals at retail companies will realize that the verdict for the year has, for the most part, been written — and that they will be better served by looking forward to customer-enhancing initiatives such as enhanced multichannel integration and rich Internet applications (RIAs), which will position companies to take advantage of stronger consumer spending when the economy does turn around. In a forecast report, Forrester finds that US online retail reached $175 billion in 2007 and is projected to grow to $335 billion by 2012. B2C eCommerce continues its double-digit year-over-year growth rate, in part because sales are shifting away from stores and in part because online shoppers are less sensitive to adverse economic conditions than the average US consumer. Despite the continued growth of the channel, online retailers face several challenges to growth: Online stores are broadly perceived as a second choice for shoppers, online retail is becoming increasingly seasonal.

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