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E-commerce Sales a Whopping
$5.3b in Last Quarter of 1999

By Jeannine Aversa   Associated Press
WASHINGTON — In a bow to the growing economic importance of electronic commerce, the government reported Thursday for the first time on cyberspace shopping and found retailers rang up $5.3 billion in sales in just the last three months of 1999.

Sales over the Internet and other online systems, which now account for a small part of total retail sales nationwide, are growing in popularity and expected to continue to expand. Private economists believe electronic commerce likely will become a big force in the economy in the years ahead.

"It's where the future is," Wells Fargo economist Sung Won Sohn said. "Twenty years ago everyone went to department stores. Now most people go to discount stores. It may be that e-retail will become the lion's share of total retail sales in another 20 years."

The Commerce Department's $5.3 billion unadjusted fourth-quarter sales figure marked the government's first in what will become a quarterly estimate of goods and services sold over the Internet and other online systems. The government's monthly retail sales reports include online sales but they aren't listed separately.

"This is a historical landmark that symbolizes and helps measure our transition to a new information economy," President Clinton said of Commerce's effort to keep tabs on Internet retail sales. Clinton said it was "an important step to ensure that we have accurate and timely information about the economy in the 21st century."

Commerce said that the $5.3 billion in online sales accounted for only 0.6 percent of the $821.2 billion in total retail sales during the last three months of 1999.

The online sales statistic is based on a wide range of businesses — from traditional bricks-and-mortar retailers to Internet-only merchants such as Amazon.com, Commerce Secretary William Daley said.

Books, cars, clothing and furniture are among the online sales tracked. Items bought over Internet auction sites, such as eBay, also are included, Daley said. To be counted, an order must be placed online, Commerce officials said.

But the statistic does not include sales from online travel services, financial services and ticket sales for things like music concerts. Neither does the monthly retail report include these services.

Given that, some analysts believed Commerce's calculation of online sales activity may be conservative but it is consistent with how the agency estimates total retail sales nationwide.

Jupiter Communications, a research firm, estimated that consumers spent $7 billion online in just November and December — the holiday shopping season. That figure doesn't include travel and financial services but it does include ticket sales.

Forrester Research, another research company, estimated that consumers spent $10 billion online during the fourth quarter. That includes tickets and travel but doesn't include financial services.

This past holiday season was a huge success for Internet retailers, which enticed new shoppers with aggressive advertising. With plentiful jobs, rising incomes and stock market gains, Americans have been in the mood to spend.

Consumer spending accounts for two-thirds of all economy activity and has been the locomotive behind the nation's speeding economy, which grew by a breakneck 6.9 percent annual rate in the fourth quarter. The Federal Reserve has raised interest rates four times since June to slow the red-hot economy and keep inflation from escalating.

The new quarterly online sales reports by themselves will not change the government's monthly estimates of the U.S. economy's growth or prospects for inflation, private and government economists said.

That is because online sales are already captured in the government's broadest measure of the economy's pulse: the Gross Domestic Product, the total output of goods and services.

Private economists believe Internet retailers are putting pressures on traditional retailers to cut prices, a force that would augur for lowering inflation.

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