May 26, 2004--For small businesses that have been debating whether to move online, recent sales numbers are making a strong case for making the leap. Online retail sales are estimated to grow by 27% to $144 billion in 2004, according to a Forrester Research study conducted for Shop.org, an association of online retailers.
The growth rate marks a cooling from the 51% increase experienced last year but still represents remarkable growth for a sector that generated only $13 billion in sales in 1998.
The study expects the apparel, flowers, cards, gifts, and health and beauty product categories to all grow by 40% or more in 2004.
"Consumers continue to expand their online buying into new product categories as they become more comfortable shopping online," said Carrie Johnson, senior analyst at Forrester Research.
Online sales as reported by the Department of Commerce support the growth projections. For the first quarter of 2004, e-commerce sales rose to $15.5 billion, an increase of 28.1% compared to the same period last year. This represented 1.9% of all retail sales for the period.
A large number of small businesses have recognized the trend and are adapting their businesses to it. In a survey of more than 1,000 small-business owners, Harris Interactive found that 70% either have or will have an online presence by the end of 2004. Comparatively, in October 2002, only 35% of small businesses operated their own website, according to the Small Business Administration.
MATT QUINN contributes to the Wall Street Journal's corporate finance blog. He has also written extensively about banking and corporate finance for publications including Inc., American Banker, and Financial Week. He lives in Brooklyn, New York.