Online Sales: Still A Threat

Forget the falling stock prices. Web sales are reaching a critical mass

You can't blame retailers for heaving a sigh of relief. Those pesky dot-coms are tanking left and right. Even mighty Amazon.com Inc. is in the doghouse. But retailers' relief could be short-lived. Here's why: The Web's bite into store sales is about to hurt. A widely accepted rule of thumb says a 10% to 15% loss in sales vaporizes a store's profits. This year, online sales of books will top 11% of overall sales, up from 8.5% in 1999, while CDs and videos will more than double their penetration, to 10%, according to Boston Consulting Group Inc. Online personal computer and software sales already have taken 18% of the total industry--and look what happened to CompUSA: The PC chain is about to be acquired by Mexican retailer Grupo Sanborns. "If you take 18% out of a store's revenues, it will turn the economics very quickly negative," says consultant James Vogtle of Boston Consulting.

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