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ANALYSTS WEIGH ON-LINE GROCERY SALES

NEW YORK -- Cybershoppers by 2003 will spend as much money on groceries as they do on books, but the effect on the overall grocery market will only be about 2% of distribution, an e-commerce analyst said last week.Nicole Vanderbilt, vice president and senior analyst for Jupiter Communications here, told an audience at the National Retail Federation convention here that consumers will spend about $7.5

NEW YORK -- Cybershoppers by 2003 will spend as much money on groceries as they do on books, but the effect on the overall grocery market will only be about 2% of distribution, an e-commerce analyst said last week.

Nicole Vanderbilt, vice president and senior analyst for Jupiter Communications here, told an audience at the National Retail Federation convention here that consumers will spend about $7.5 billion for groceries on-line in 2003. "The dollar figure will rival book sales, but will represent a much smaller percentage of the overall market."

Vanderbilt's comments came at a panel discussion of e-commerce executives hosted by New York-based consulting firm Ernst & Young, which last week released the results of a global on-line research study. The study predicted that all on-line sales in the United States will approach $50 billion in 2000, nearly doubling from 1999, as the channel adds more consumers while those already on-line make larger purchases and shop more often.

U.S. consumers spent an average of $1,205 in 1999 on Internet purchases, up more than four times the average of $280 in 1998, the report said. Shoppers made an average of 13 purchases on-line in 1999, increasing from six in 1998 and four in 1997.

"More consumers flocked to the Internet than ever before and they were big winners this year in the evolving e-commerce marketplace," said Stephanie Shern, global director of retail and consumer products for Ernst & Young. "They were able to use the Internet to find good products at competitive prices and, in some cases, take advantage of aggressive promotions such as free shipping."

While the most popular items for sale on the Internet continue to be computers, books, recorded music, electronic goods and toys, Shern noted that "consumers are beginning to purchase core, non-discretionary categories such as apparel, drugs and groceries. This demonstrates that on-line retailing in the U.S. is becoming a mainstream activity." Further, the demographic makeup of U.S. on-line shoppers is beginning to resemble a more "normal" mix, with an even spilt between male and female shoppers, Shern said.

Shern also predicted that e-tailing companies will undergo significant consolidation as competition increases and the cost of creating new dot-com companies becomes increasingly expensive.

Deborah Lowe, an Internet marketing professor at the University of San Francisco, predicted in the report that on-line grocers will capture 10% of the grocery volume in 2000 and another 10% in 2001. She said that success factors for on-line grocers include the low cost of goods, broad product selection, convenience, education and user-friendliness of the site.

The Ernst & Young study found that the chief concern of Internet shoppers is high shipping costs, cited by 53% of survey respondents.