eMarketer’s Jeffrey Grau looks at internet shoppers -- who they are, how many of them there are, and what they are doing online.

Earlier this week, eMarketer released new projections for ecommerce growth in the U.S., estimating that online retail sales and leisure travel sales totaled a combined $118 million in 2004, a gain of more than 25 percent over 2003. eMarketer projects that ecommerce growth will slow from 2004’s rate, but will continue to register healthy double-digit gains through 2008.

One of the keys to growth in online commerce is the number of online shoppers -- those who browse, research or compare products online, if not necessarily buy. Understanding who these shoppers are is, in turn, crucial to marketers looking to sell online.

The demographic profile of the online shopper has evolved since the early days of online shopping. In its infancy, online shopping was the purview of well-educated, high-earning, 20- to 30-year-old single white males. Today, online shoppers are closer to resembling the greater U.S. population.

Online shopping is one of the most popular internet activities and online buying one of the fastest-growing internet activities. According to “A Nation Online: Entering the Broadband Age,” a September 2004 report from the U.S. Department of Commerce, National Telecommunications and Information Administration (NTIA), searching for product/service information is the second-most-popular online activity after email or instant messaging. In 2003, 76.5 percent of internet users ages 15 and over indicated they researched products online.

To define the universe of online shoppers, eMarketer incorporates data from the U.S. Department of Commerce and numerous research firms and trade associations. The data is compared and contrasted with an eye toward fitting it together to create an accurate picture of consumer demand. Macroeconomic political and technological trends are also considered for their impact in building forecasts.

The basic building block in eMarketer’s ecommerce model is the internet user population. By the end of this year, nearly 60 percent of Americans, or 175.4 million people, will be internet users, eMarketer estimates. This projection is extrapolated from U.S. Department of Commerce Census Bureau internet user estimates obtained in November 2003. eMarketer’s 2003 and 2004 figures are comparatively higher because the Department of Commerce study starts with an earlier age base and has a more inclusive definition of who is an internet user than most of the other research firms.

Opinions vary among research firms over the age at which young people seriously begin to buy online. eMarketer maintains the view that the population of online buyers consists of individuals ages 14 and older who use the internet. While some younger internet users are able to purchase online with the help of adults, the dollar amount of these purchases is insignificant compared to total online sales.

In 2005, eMarketer estimates there will be 151.7 million internet users ages 14 and older, accounting for two-thirds of the total 14 and older population. Annual growth rates are declining as internet penetration reaches a saturation point.

Data from Harris Interactive closely supports eMarketer’s conclusion that age 14 is the threshold for online buying. As young people enter the early teen years of 13 to 15, their online spending increases dramatically. Preteens are less able to make online purchases, mainly because parents forbid it. The data also shows that much offline youth spending is influenced by online research. An interesting phenomenon captured by Harris in this study is that online spending decreases for 16- and 17-year-olds before picking up again after high school. Harris finds that 16- and 17-year-olds view shopping as a means to exercise independence from parents and as a social activity to be enjoyed with friends. Generally, by the time an individual reaches 18, the convenience of shopping alone online replaces the desire to shop with friends.

In contrast, Teenage Research Unlimited finds that the 16- to 17-year-old age group is the threshold for online buying. Its data shows that online buying jumps from 36 percent to 54 percent by the time teenagers reach that age range, then levels off at 56 percent for 18- and 19-year-olds.

Based on estimates from leading research firms and from internet usage trends, eMarketer estimates that today about three out of four internet users ages 14 and older shop online for retail products and services. This translates into 114.2 million online shoppers. This year the number of online shoppers is expected to increase by 4.4 percent over 2004. In 2003, the annual growth rate was 7.6 percent. By 2008 it will slow down to 2.6 percent, as most internet users who plan to shop online will already be doing so.

This article is drawn from “E-Commerce in the US: Retail Trends,” an eMarketer report. Jeffrey Grau is a Senior Analyst for eMarketer.