Online Sales of Food/beverage/grocery Down: Study

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Online Sales of Food/beverage/grocery Down: Study

WASHINGTON -- With $219.9 billion in revenues, the growth of e-commerce was higher than expected in 2006, matching the 25 percent year-over-year growth rate that the industry experienced in 2005 -- but online sales of food and beverage declined by 8 percent, according to part one of "The State of Retailing Online 2007" report, released today by and Forrester Research.

"Every major online retail category experienced positive growth, with the exception of grocery, which faces the peculiar hurdle of having regional solutions," the report's authors noted. "That category also has experienced some downturn as key grocers diverted focus away from the Web back to their core store strategies."

The good news is that online sales of food/beverage/grocery are projected to increase by 19 percent from 2006 to 2007, according to the study. Overall, 2007 online sales, including travel, are expected to rise 18 percent to $259.1 billion.

The Research study's findings are in contrast with another report from Jupiter Research, which estimates that online grocery sales surged 32 percent to $4.4 billion in 2006 and are expected to climb to $5.5 billion in 2007.

In the study, food and beverage are estimated to account for about 1 percent of total online retail sales. Online retail makes up only 7 percent of total retail sales.

The top hurdles to even greater growth include the delay between ordering and receiving many products, and the fact that consumers may prefer to physically inspect an item prior to purchase, the study said.

Travel, the single-largest e-commerce category, continues to drive a significant portion of totally industry growth. Apparel, accessories, and footwear, meanwhile, experienced a particularly strong year in 2006.

Part 2 of the study, to be released in September 2007, will detail the tactics that online retailers found most successful, and which site features and promotions resonated most with online consumers.