Online boom has small offline impact

Analysts say the bigger impact of the surge in e-commerce sales is on catalog and telephone marketers.

Jan. 2, 2002 4:43 p.m. PT

3 min read

Despite booming online holiday sales, Net retailers have had relatively little short-term impact on brick-and-mortar merchants, analysts say. But online merchants with catalog or phone sales report some shift toward online channels, a direction some applaud.

Sharper Image, for example, reported last week that online sales increased 492 percent in the first three weeks of December, but the specialty retailer's catalog and physical stores also saw increases, albeit smaller ones. For physical stores, comparable sales grew 9 percent while mail order jumped 27 percent.

"Online it is not cannibalizing our existing business," said Sharper Image spokeswoman Tracy Wan.

Nonetheless, some online retail analysts expect the Internet to benefit from "channel shift."

"It's hard to isolate where incremental dollars are coming from, but we believe mostly from channel shift," said Nicole Vanderbilt, e-commerce analyst at Jupiter Communications. "

A bookstore in Palo Alto, Printers Inc., is closing, with the owners in part blaming online sales for that store's demise. But they also complain that city officials weren't doing enough to encourage shoppers to go to the retail area where the bookstore is located.

Vanderbilt notes that the impact of online sales on the overall retail sector is hard to isolate from factors like warm weather and good economic times, which boosted overall spending this season.

At 1-800-Flowers.com, which peddles posies both online and over the phone, online sales are eating into the phone sales.

"We have definitely seen a migration from the telephone to the Web site," said a corporate spokesman.

Barry Sosnick, a stock analyst at J.W. Genesis Capital Markets, notes that the booming online music market still accounts for just 0.3 percent of the overall $12 billion market. In fact, the shift to online sales was about as large as the move from specialty music retailers toward mass merchandisers.

And online music sales may not be as profitable as sales through physical stores, Sosnick said. Online music stores are doing well in narrow categories like jazz or classical music, the least-profitable categories.

And Internet music merchants find music catalogers like Columbia House rushing online.

"Catalogs are an expensive business to be in. I would almost prefer to sell over the Internet rather than send out glossy catalogs," Sosnick said.

Phil Polishook, vice president of marketing at eToys said the online toy store has anecdotal evidence, but no firm statistics, that some of its buyers are shifting from physical storefronts

"It's not something that we care about. The press cares about it, and land-based stores care about it," Polishook said.

Eddie Bauer's move onto the Net three years ago was designed to give the clothing retailer multiple ways for customers to buy.

"If they come to us online or go to a store, we just want those customers to have an experience with Eddie Bauer," said Judy Neuman, Eddie Bauer divisional vice president for interactive media.

She notes that in the 1997 holiday season, nearly 60 percent of online customers were new to Eddie Bauer. And the company, which also has physical stores and a catalog, finds that thousands of Internet visitors request a paper catalog every month from the Web site.