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Online shopping figures disappoint analysts

Reports from Media Metrix and Goldman Sachs Friday indicated that smaller e-tailers may be getting a lump of coal for poor performance this holiday season.

While (Nasdaq: AMZN) and other established players fared well, the shopping season peaked earlier than expected this year, leaving the numbers short of analysts expectations, and indicating the overhang for smaller e-tailers will continue into mid-2001.

The news should come as no surprise; analysts have been predicting that growth wouldn't be as impressive as last year's since September. Those concerns have stoked worries about sales figures from and others.

A last-minute attempt to lure in holiday shopper's from Kmart's (NYSE: KM) could also indicate sales aren't adding up as expected. The site announced today a massive blowout clearance with discounts of up to 70 percent.

Media Metrix's Friday report indicates that 33.8 million unique visitors went to online retail sites during the fourth week of the holiday-shopping season. That's down by 5.2 percent from its peak of 35.6 million during week two.

For the fourth week (ending Dec. 17), however, traffic was up by 24.6 percent compared to the same week last year.

"Last year online shoppers increasingly flocked to retail sites through the final days of the holiday season," said Anne Rickert, measurement analyst, Media Metrix. "This year online shopping is up, but many who might have been disappointed with or fearful of late-arriving goods last year appear to have shopped earlier."

The report also indicated that Toysrus (NYSE: TOY) and (Nasdaq: BUX) ranked among the top ten sites in terms of unique visitors.

Goldman Sachs' survey also showed an earlier peak to the shopping season online. Analyst Anthony Noto said that despite a modest recovery, the deceleration in online sales continued in week 7 of his firm's e-tailing survey.

For the week ended Dec. 17, online holiday sales peaked at $1.59 billion. Though that's up 81 percent year-over-year, it's down from the average 108 percent year-over-year gain for the online sales covering the period of Oct. 31 through Dec. 17. Since shoppers got the majority of their online buying done earlier on this year, sales have slowly dwindled, leaving analysts disappointed.

"We continue to see sales trends decelerate and it appears that sales will come in at the low to mid range of our 50-100 percent estimated increase," Noto said in his research note.

Overall, Noto observed that satisfaction remains high with 74 percent of shoppers likely to buy online again, but that balancing stock-outs versus inventory write-off risk is still a significant challenge for e-tailers.

Noto also observed that smaller players have suffered due to the negative press surrounding e-commerce, as companies with a large customer base and a consistent reputation for high customer service have garnered market share from them.

This was evidenced by Amazon's (Nasdaq: AMZN) continuing strength; it lead in category market share in its five most important categories: books, music, video, consumer electronics and toys. These are also the most important categories overall, and November-to-date sales in the five categories in aggregate are up 67 percent, "which bodes well for Amazon's sales," Noto said.

Amazon was the market share leader at 16.3 percent, followed by at 13.2 percent. and both lost ground during the week, down to fourth and seventh place, from the number one and number three spots.

In a mid-month report, Noto maintained his outlook on Amazon, eBay (Nasdaq: EBAY) and (Nasdaq: FLWS), while reducing estimated for several companies including (Nasdaq: BNBN), Webvan (Nasdaq: WBVN), eToys (Nasdaq: ETYS) and (Nasdaq: ASFD).

Noto said he still believes "there will not be a sector rally and do not recommend 'bargain' shopping for e-commerce stocks."

"We think the shake-up & capital-constrained environment that has characterized 2000 will continue until mid-200," he said, adding that the overhang from the lack of profitability, uncertainty of business models, & cash burn rates will persist for smaller companies, while companies with sufficient capital, clear market leadership, scaleable infrastructure, and clear profitability profiles may see sustainable price appreciation from a strong holiday season."