U.S. Online retail sales are expected to reach billion by 2002. Although only a few of today's embattled dot-com retailers may survive the ongoing industry shakeout, those that do survive will keep a strong hold on the overall consumer spending.

U.S. Business-to-consumer sales over the Internet will grow from an estimated billion in 1999 to billion in 2002 and to billion by 2004. Still, consumer online sales will only make about 3 percent of total consumer spending by 2004. Few Internet retailers will survive due to excessive cash burn rates in comparison with their capital. Those that do survive will have a permanent role in the retail landscape, capturing billion in revenues in 2002 and billion in 2004.

Business-to-consumer Internet sales are still showing robust growth, but with a likely flattening growth curve in 2002. Dot-com merchants and mail-order merchants, who have converted to online sales, will share in that growth. It will be the multi-channel retailers - those who sell over the Internet, in stores and through mail-order catalogues - that will dominate Web sales by 2002. This pattern plays to the advantage of click-and-mortar companies that can operate in real-world, telephone and Internet sales channels.

By 2002, more than 60 percent of the projected billion spent on the Internet will be made through "clicks-and-mortar" merchants, while only 26 percent will be made via Internet-only retailers.
"Bricks-and-mortar" retailers that developed online stores made up about 33 percent of consumer sales in 1999. And the spending of the "multi-channel" retailers will grow to two-thirds of the market, or about billion, by 2002. For traditional retailers, this analysis is good news - the game is not over, and real-world stores still matter, but the winners will be those that master multi-channel marketing and sales, not those that play only in the real-world stores.