A recent New York Times article has pointed out a trend showing the slow down in the growth of online shopping. The article points out a few previously hot industries are starting to show a slowing in growth.

Forrester Research, a market research company, projects that online book sales will rise 11 percent this year, compared with nearly 40 percent last year. Apparel sales, which increased 61 percent last year, are expected to slow to 21 percent. And sales of pet supplies are on pace to rise 30 percent this year after climbing 81 percent last year.

The article goes on to note that overall online sale were increasing at a rate of 25% each year but should slow to a 9% yearly growth rate by the end of the decade.

Don't worry, the sky is not falling

If the NYT article was about government spending of tax dollars on certain pet programs this slow down would have been billed as a "cut" in growth. But that's not what's happening. Slowing in growth is inevitable with time. The fact is, as growth occurs, it gets more and more difficult to sustain previous growth percentages. That, my friends, is the very nature of percentages.

Okay, quick math lesson. If you start with $1M and add 25% growth to that you increased your $1M by $250,000. The next year you start with $1.25M. If you grow by another $250,000 (to $1.5M total) you've only increased by 20% this year over the previous. A full 25% growth would have been an increase of $312,500 totalling $1.56M and change.

So naturally growth rates tends to slow as similar revenue percentage increases become more difficult to sustain.

Let's look at this another way. The article points out that growth has been about 25% since 2004. If we slow to only a 9% growth by the end of the decade, the growth in raw dollars in 2010 will be close to the growth in raw dollars in 2004. Just another example in the natural tendency of growth rates to slow.

So why the math lesson? Because people tend to hear words like "slow down" and interpret that to mean decline. It doesn't. It just means that the Internet is moving past its adolescent growth spurt and moving into adult hood. Growth is still occurring, just not as fast.

The natural balance of things

The article, which is worth a read, points to a number of potential reasons why the slowdown might be occurring. One of the things that interested me most was noting that many retailers are learning how to leverage offline avenues better. They are trying to make shopping more fun.

They even noted that some online stores are leveraging offline avenues to sell their products and services.

The reaction to the trend is apparent at Dell, which many had regarded as having mastered the science of selling computers online, but is now putting its PCs in Wal-Mart stores. Expedia has almost tripled the number of travel ticketing kiosks it puts in hotel lobbies and other places that attract tourists.

Even Blockbuster, while creating a more robust online DVD rental service is leveraging the local video store as a means to increase sales. All this isn't a sign of desperation so much as it is smart marketing integration.

At some point online shopping will reach critical mass and growth will be near identical to offline shopping growth. Percentages will be in line with economic growth and/or recession. But eventually a natural balance will be struck. It's doubtful that online will ever (or at least in the foreseeable future) overtake offline shopping. One thing is for sure, though, online shopping is here to stay. It may get more crowded and more competitive, but that, too, will balance out over time.

June 19, 2007

Stoney deGeyter is the President of Pole Position Marketing, a leading search engine optimization and marketing firm helping businesses grow since 1998. Stoney is a frequent speaker at website marketing conferences and has published hundreds of helpful SEO, SEM and small business articles.

If you'd like Stoney deGeyter to speak at your conference, seminar, workshop or provide in-house training to your team, contact him via his site or by phone at 866-685-3374.

Stoney pioneered the concept of Destination Search Engine Marketing which is the driving philosophy of how Pole Position Marketing helps clients expand their online presence and grow their businesses. Stoney is Associate Editor at Search Engine Guide and has written several SEO and SEM e-books including E-Marketing Performance; The Best Damn Web Marketing Checklist, Period!; Keyword Research and Selection, Destination Search Engine Marketing, and more.

Stoney has five wonderful children and spends his free time reviewing restaurants and other things to do in Canton, Ohio.

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