Dot Calm Era...Huh?

Remember Nicholas Carr? To refresh memories here is a blurb from the pages of Where Are They Now? - Carr wrote "IT Doesn't Matter" in 2003, a controversial story that appeared in the Harvard Business Review.

Fortunately for the job security of all who read this column (and my own, too), Carr's premise turned out to be misguided. But I thought of him after reading a front-page story in the New York Times a few weeks ago. The story declared "Some Buyers Grow Web-Weary and Online Sales Lose Steam."

Had Carr struck again? It turns out he had nothing to do with this story. The culprit, I mean source, is a study by Jupiter Research, which predicts the growth of online sales will drop each year until the end of the decade to wind up at less than 10 percent.

While double digit growth is welcome news for most businesses, a mere 10 percent rate would be disappointing for an industry that has rung up a 25 percent growth rate since 2003, according to a report by NRF's Shop.Org and Forrester Research.

How can a mature growth rate settle into an industry barely a decade old? How can a slowdown occur when the number of domestic Internet users grows steadily and worldwide users grows exponentially? How can sales growth taper when mainstream users have barely overcome initial reluctance, and online retailers have barely scratched the surface of becoming true cross-channel merchants?

The problem, it turns out, derives from a preliminary assumption in the story's source report. It estimated the online sales growth rate for 2006 would dip to 20 percent. But when the final figures were tallied the growth rate was either 25 percent, according to the 2006 Shop.Org and Forrester study, or 24 percent, according to a comScore Networks report.

Will sales growth again approach the 25 percent range in 2007? Early forecasts by comScore and others say it won't due to the downturn in home values and the credit crunch currently gripping the national economy. Forecasters also say that online sales simply can't continue doubling every four years as they have since 2002.

Carr's prediction that "IT doesn't matter" will eventually come true. But it hasn't in the four years since he floated the idea. The same will be true for the downturn in online sales growth. Cross-channel retailing is just a toddler and it has many years of fast growth ahead before it reaches maturity.