- The Washington Times - Thursday, June 1, 2000

Internet sales rose in the first three months of the year, according to a report released yesterday by the Department of Commerce.

But they still constitute a small fraction of total retail sales. Consumers bought $5.26 billion worth of goods on line not including airline tickets or brokerage services in the first quarter, up from $5.19 billion in the last three months of 1999, according to the report.

That's compared with $747 billion in total retail sales, down 9 percent from $821 billion in the fourth quarter of 1999. That quarter includes the holiday season, the time when retailers traditionally see their biggest revenues of the year.

The hype a year ago about the revolutionary power of on-line sales has quieted, but analysts still expect the Internet to be a major part of Americans' buying lives.

"Too much was made out of the numbers a year and two years ago," said Ken Cassar, senior retail analyst with Jupiter Communications, a New York Internet research firm.

"The growth has been nothing less than staggering; however, it built off a very small base," he added.

Lee Price, chief economist for the Commerce Department, agreed.

"The on-line retail was swimming up a very fast stream" in the first quarter, he said. In contrast, traditional retail stayed the same or fell in some sectors.

Dan Ries, a managing director with brokerage C.E. Unterberg Towbin, added that the electronic-commerce numbers are such a small fraction of the total because items that would not sell easily on the Internet like gasoline and eating out are included.

"What works well on line are branded items," he said.

Mr. Cassar said that short-term, traditional catalog companies are poised to do best on the Internet because their business models are well-suited to electronic commerce and mail order. But long-term, brick-and-mortar retailers will come out on top because consumers can research products on line, then buy them in stores or vice versa.

"[Consumers] want to try clothes on, they want to feel the fabric, they want to squeeze the tomato, they want to smell the perfume," he said.

Jupiter has estimated that this year, electronic-commerce sales will reach $29 billion, just less than 1 percent of total retail spending.

But Mr. Cassar noted that number does not take into account the impact the Internet has on traditional retail. By 2002, for every $1 spent on line, $8 will be spent off line as a result of Internet research, he estimated.

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