E-Commerce Update

From time to time we use this space to provide you updates on how the Internet is affecting marketing and commerce.

• The adoption of high-speed Internet access slowed last year. There were 16.2 million broadband subscribers in the U.S. in June 2002, compared to 12.8 million in December 2001. However, American Electronics Association spokesman Michaela Platzer told Reuters that the association expected double digit growth over the next two years as competition between telephone and cable companies drives access prices downward.

• 2002 was another excellent year for online retailers. E-retail sales comprised 3.6% of all retail sales in 2002. Shop.org, a unit of the National Retail Federation, reported that 7 out of the top 10 online retailers were profitable last year. However, among online retailers there remains a clear distinction between catalog sellers and merchants with physical stores, vs. online companies with no physical presence. The former group is generally profitable while the latter is not. Frank Barnako of CBS Marketwatch.com reports that the costs of customer acquisition and product distribution systems are higher for the pure online retailers, who can't piggyback on the prior investments of physical store units.

• Email spam is universally reviled by Internet users, but killing off the junk email without harming legitimate commercial ventures is no easy task. The Direct Marketing Association reported in May that commercial email generated $7.1 billion in sales annually. It also reported that 36% of all email users (21% of all adult Americans) bought a product or service because of commercial email during the past year. About 9% of email users say they bought something after receiving an unsolicited announcement.

• Another indicator that we live in a wired world is that nearly half of the largest 250 U.S. newspapers now offer Web-only employment advertising. CBS Marketwatch.com reports that Corzen, Inc. (a company that monitors advertising spending) said that in the past 6 months, the percent of large newspapers with Internet-only recruitment sites has risen from 32% to 49%. Newspapers charge less for their online ads than for those in the printed version of the paper.