By Maxine Shapiro, KERA 90.1 business commentator
Dallas, TX – I can still get overwhelmed by the number of retailers - not to mention the oddity of things I can buy - online. What's been a convenience for the consumer has registered as a loss for the e-retailer. That was up until last year. I'm Maxine Shapiro with KERA Marketplace Midday.
At long last, the online retailer broke even in 2002. It only took about six years. Take into consideration the uninspiring year of the retail industry, and you've got quite a feat. A comprehensive survey conducted by Forrester Research for Shop.org, the Internet merchant trade association, says it all.
E-tail sales soared to $76 billion in 2002. That's up almost 50% from '01. So besides the growth in revenue, 70% of the retailers reported positive operating margins. Only 56% could make those claims the year before. But overall, 2002 was break-even for the e-retailer, better than the 6% loss of the previous year.
So how did they finally turn the ink from red to almost black? First, shipping costs were down. Just two years ago, retailers had to spend almost $14 per shipment. Last year that dropped to $5 per shipment. They developed smarter strategies and had stronger negotiating power to reduce warehouse charges.
Customer service got streamlined. More sophisticated order-tracking features and e-mail notifications reduced personal phone calls about orders. But it's the online advertising market which was the greatest factor in reducing costs. According to the New York Times, "In 2000, online merchants spent $20 on marketing for every order they received. That dropped to $12 in 2001 and $8 last year."
So this year it's projected the online retail industry will approach $100 billion in sales eager to, once and for all, toss the red pen away. For KERA Marketplace Midday, I'm Maxine Shapiro.
Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m.
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