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HolidayBuyer's Guide
Tech Industry

E-tailers see rosy outlook for holiday season

Online retailers are meeting or exceeding expectations for holiday sales revenues, and customer service has improved significantly from last year, according to a new study.

Online retailers are meeting or exceeding expectations for holiday sales revenues, and customer service has improved significantly from last year, according to a new study.

In a recent survey of 50 companies conducted by Framingham, Mass.-based International Data Corporation, 83 percent of online retailers reported that revenues are up over last year. Of that group, 26 percent have seen sales more than double, while another 23 percent are seeing 61 percent to 100 percent growth in revenue.

Gigi Wang, an industry analyst at IDC, said the survey did not focus solely on large, well-known e-commerce sites, such as Amazon.com, but spanned across all industries, including smaller "dot com" start-ups.

"These 50 companies indicate that the e-commerce market [this holiday season] is going to pretty much be on target," said Wang.

Internet retailers and industry observers have been optimistic that more consumers would shop online this holiday season. IDC said it had previously forecast $7.1 billion in e-commerce sales--a 64 percent growth in U.S. consumer online purchases for the fourth quarter of this year. It also said survey results indicate that figure will be met or surpassed.

Other market analysis firms have predicted large numbers as well for the holiday shopping season. Forrester Research estimates that 8.6 million households will shop online this season, spending roughly $4 billion, up from $1.5 billion last year, and making this a record holiday shopping season online. Internet research firm Jupiter Communications, which released its sales projections in September, said e-commerce sales in November and December could reach $6 billion.

While revenues are increasing, online retailers are reporting that they have overcome the hurdles with customer service experienced last year, the survey found. IDC said that Web site outages and customer fulfillment problems reportedly have been "greatly reduced." Still, more than one-fourth of Web sites say they have experienced problems in handling live operator support requests from their online customers.

Because of more online shopping transactions, some Web sites, including eToys and Amazon, have run out of many popular items, such as Pokemon toys and Furby. In the midst of the holiday shopping season, some Web sites, including Amazon and Toys "R" Us, also ran into problems with Web site outages because of a high volume of Net shoppers.

IDC's Wang said the good news is that revenues for most of these e-commerce sites are increasing, but the bad news is that about 31 percent of e-tailers said Web traffic is exceeding their capacity for customer service support and order processing and fulfillment. In response to that issue, more e-commerce sites are pouring money into their operations, including order processing, fulfillment and other customer service needs, along with upgrading their Web sites, Wang said.

"Consumers are raising the bar to how they define what's a good shopping experience [online] because they're more knowledgeable, more demanding and more experienced [this year]," said Wang.

Still, she added, 25 percent of online retailers said their customer service challenges, such as order processing, have improved over last year and that problems were minor.

"The bottom line is that the e-commerce market has developed to the point where we see losing strategies as well as winning strategies. This is a good thing," Wang said.