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E-Commerce: A Statistical Market Analysisand Forecast of Emerging TrendsGrady Maguireforecast will cover U.S. online retail salesindependently and as a percentage of totalretail sales through 2020. Comparing theresults under two models, S-Curve analysisand the Dent Method, forecast consistenciesand discrepancies will be noted and analyzed.Only time will tell the degree to which theinternet will make its imprint upon consumersociety.Short and Long-Term ResearchThe research is framed by the work ofeconomists such as Harry S. Dent andresearch organizations such as ForresterResearch, Jupiter Research, and PlunkettResearch. At the short-term end of theresearch spectrum, Forrester Research, JupiterResearch, and Plunkett Research gather andanalyze data concerning trends that arehappening now. They often find correlationsand make predictions based on currentstatistics. Similar methods will be used in thisresearch project to analyze e-commerce salesdata and compare it to total commerce data.At the long-term end of the researchspectrum, Harry Dent is an economicforecaster who uses a common senseapproach. Essentially, he states thateconomics are tied to demographics. In turn,commerce is the logical result of peoplemaking predictable spending decisions as theymove through life (“Dent Method”).Analyzing these predictable trends generatesaccurate long-term forecasts which can beutilized by both businesses and consumers.The Bureau of Labor Statistics supports HarryDent‟s methods by emphasizing theimportance of demographics. Demographicsprovide a direct link to the condition of thelabor force and purchasing patterns. Thegovernment institution recognizes thatpopulationtrendsaffectemploymentIntroductionOn August 11, 1994, Daniel Kohn andone of his Swarthmore College classmatesstood on the cusp of history. Little did theyknow, but these college graduates andfounders of NetMarket were about to initiate atrend that would revolutionize the culture fordecades to come. With the purchase of theSting CD, “Ten Summoner‟s Tales,” thesecollege grads completed the first ever secureretail transaction on the World Wide Web.Although Randy Adams and the InternetShopping Network argue that they completedthe first online transaction a month prior, onefact is clear – the year 1994 representsgroundbreaking achievements in the internetrealm (Gilbert 2004). Fast-forward just 14years later to read the following statementregarding the industry these pioneersunlocked: "Relatively strong growth was seenin the global Internet and E-Commerce sectorin 2007-2008, despite the global economiccrisis.The Internet is about saving time (andtherefore saving money), and the potential ofthe Internet has barely been tapped (ECommerce)." If what Plunkett Research statesabout electronic commerce is even remotelycorrect, the world is likely to experience aPower Wave - a revolution in businesspractices that truly exploits the advantages ofnew technologies (“Dent Method”).Analyzing the past and present growth ofonline retail sales in the United States, a trendwill be identified and given a projectedduration time. In order to identify whenonline retail sales will reach market maturity,a forecast will be created to identify the depthand impact of the e-commerce trend inquantifiable terms. Overall, the impact of ecommerce on consumer purchasing will bethoroughly reviewed. The analysis and41

opportunities by influencing the demand forgoods and services. Population changesproduce related changes in the demographiccomposition and size of the labor force. TheBureau of Labor Statistics also states that“Population is the single most importantfactor in determining the size andcompositionofthelaborforce ”(“Tomorrow‟s Jobs”). Since such a highdegree of importance is placed on thecomposition and size of American society,much attention will be placed on analyzingdemographic trends and their relation toconsumption.Usingaforementionedtechniques, the research will consist offinding and analyzing the e-commerce trendas it emerges. The better data can be used inaccordance to accepted methodologies such asthe Dent Method, the more accurate anduseful the predictions will be.Research MethodsIn order to accurately analyze and forecastthe online shopping trend, adherence toindustry-approved methods is tantamount.The primary methodologies used will be theDent Method (mentioned above), SPSSanalysis, and S-Curve Economics. Followingindustry standards for social science researchwill provide a solid foundation for thegeneration of reliable forecasts.First of all, Statistical Package for SocialSciences (SPSS) is a widely used analysis toolfor the social sciences. Recently rebranded asPredictive Analytics SoftWare (PASW) in2009, the statistical analysis tool can beimplemented to interpret data in a number ofways. The software can be used to finddifferences, relationships, or descriptions ofdata. However, no analysis is meaningfulunless the data is reliable and valid. Data isreliable if it can “consistently measure thetopic under study at different times and acrossdifferent populations” (Hinton 356). On theother hand, validity refers to the strength ofthe conclusion. Simply put, are they right?Keeping both reliability and validity in mind,SPSS becomes a powerful tool. SPSS createsa mathematical way in which to make factbased predictions using current data.Furthermore, finding correlations in the datawill help generate predictive models foranalysis and conclusion. While SPSSfacilitates the detailed analysis of e-commercedata, it is the methodology of S-Curveeconomics which enables trends to beforecasted.S-Curve economics illustrates theintroduction, growth, and maturation ofinnovations as well as the technologicalcycles that most industries experience.Essentially, an S-Curve can be broken downinto four phases: innovation, growth,maturity, and decline. Innovation refers to theintroduction of a new product or technologyto the market place. The majority of productsand technologies never make it past the firstphase due to the high costs and low revenuesassociated with new ideas. Specifically, theinnovation phase represents the period of timewhen 0%-10% of the market adopts the newtechnology or product. As a product movesthrough the innovation phase, marketadoption grows very slowly if it is adopted atall. However, once a concept, such as ecommerce, reaches 10% market penetration, itis said to be a concept whose „time has come.‟Entering the growth phase, which represents10%-90% market penetration, the conceptstarts to grow in an exponential fashion.Unlike the slow growth during innovation,once about one out of every ten people readilyuses the technology, it begins to grow likewildfire. To put it into perspective, it takesroughly the same period of time to grow from10%-90% as it did to grow from 0-10%market penetration. Virtually nothing can stopits rapid growth once it enters into the growthphase. As adoption nears nine out of every tenpeople, growth slows as it enters maturity.Although almost no technology is universallyadopted and reaches 100% marketpenetration, maturity refers to slow growth42

that occurs between 90% and 100%. Once amarket matures, growth often tapers off anddeclines. The decline phase only occurs whena new technology or product is created whichmakes the old obsolete. Once the new beginsto be readily adopted by the masses, the oldstarts its decline. The S-Curve is essential tounderstanding how markets move. Combinedwith the Dent Method, it further improves theaccuracy of forecasts related to e-commerce.Initial ProjectionsBased on current data, it is projected thate-commerce will experience the growth phaseof its S-Curve over the next decade. I expectthe rapid growth to result in the maturation(roughly 90% penetration of the potentialmarket) of online shopping by 2020. Despitethe current economic downturn, e-commercecontinues to grow while other industries movebackward (“E-Commerce”). Since onlineshopping is based on saving time and moneyfor the consumer, as well as the businessowner, hard economic times will only deepenthe e-commerce trend. While sales may notincrease as rapidly as in strong financialconditions, individuals will look to spendtheir limited finances in as efficient a fashionas possible. The internet, coupled with theability to do comparison shopping, research,analyze customer reviews, and order from asingle location, provides the demandedshopping efficiency.S-Curve economics presents a case for therapid growth of online shopping. Due to thenature of market development, exponentialgrowth occurs once a new technology reachesroughly 10% market penetration andcontinues until it reaches roughly 90% marketpenetration. Data compiled by ForresterResearch shows that e-commerce has enteredits growth phase in the United States. Theirdefinition of e-commerce retail sales includesall online sales except auto, travel, andprescription drug sales. Since the expectedmarket cap of US online sales is 50% of totalU.S. sales, the growth phase begins onceonline sales equal 5% of all sales. In 2007, thefeat was achieved according to ForresterResearch when online retail sales reached 5%of all retail sales in America (“U.S. ECommerce”). Historical evidence stronglysuggests that a period of exponential growthwill follow, accelerated by the speed of theinformation age. As stated earlier, newproducts and technology generally take thesame time to complete the introduction phaseas they do to complete the growth phase. Ecommerce appears to have its humblebeginnings during the latter months of 1994.Since it took 13 years (from 1994-2007) for ecommerce to reach 10% market penetration, itis expected to take approximately 13 yearsfrom 2007 for US online sales to reach 45%of total US sales, which is 90% penetration ofthe projected market. According to my initialprojections, e-commerce would complete itsgrowth phase during the year 2020. Theresults may be historically significant as theAmerican culture is transformed by internetshopping.Cultural ImpactThe fact that American society is in themidst of a culture-changing trend makes it asignificant area of investigation forAmericans in general, for research, and forthe business field. On the individual level, ecommerce tends to save Americans both timeand money. Online shopping allowsconsumers to compare costs and read productreviews from the comfort of one‟s own home.This saves time that would otherwise be spentin traffic or waiting in line. The nature of ecommerce forces businesses to respect theconsumer. The internet makes it easier thanever to compare and contrast products, doresearch, and read reviews. Businesses mustoffer customers competitive pricing and asatisfying online experience or risk losing thesale. With the click of a button, customers canleave one virtual store and enter another.According to a Forrester Research report,retailers must make their websites more43