CNET logo Why You Can Trust CNET

Our expert, award-winning staff selects the products we cover and rigorously researches and tests our top picks. If you buy through our links, we may get a commission. Reviews ethics statement

Holiday online sales may hit $1 billion

Consumer confidence in the safety of Net shopping and the arrival of mainstream retailers online could push sales to the billion-dollar mark, analysts say.

4 min read
A billion dollars in Internet sales to consumers is not out of the question this holiday season, as sales are spurred on by greater confidence in the Net's safety and the arrival of mainstream retailers, according to some e-commerce analysts.

"I would not be surprised to see it pass the billion-dollar mark [in the fourth quarter], particularly if merchants do a good job with marketing and delivery of products in the next few weeks," said Kate Delhagen, electronic retailing analyst with Forrester Research. Her official estimate is more conservative, however: $750 million in online sales in the fourth quarter, excluding cars and real estate, pushing the total to $2.4 billion for the year.

Jupiter Communications is even more bullish about online sales. E-commerce director Nicole Vanderbilt thinks online merchants will sell $1.1 billion in goods and services this holiday season, 44 percent of her projected $2.6 billion in sales for the year.

But consultancy Ernst & Young sounds comparatively like Scrooge, estimating consumer Internet sales of $220 million this season.

Analysts attribute more online holiday shopping this season to a variety of factors: greater comfort with the Net's security and privacy protections, the growing number of Internet users, and hype.

"The marketing hype is huge," said Erica Rugullies, e-commerce analyst at Giga Information Group.

The rollout of PCs that cost less than $1,000 also may provide a boost to online shopping, said Genni Combes, analyst at brokerage Hambrecht & Quist. "You're seeing very strong sales of PCs, and we suspect consumers are buying PCs and going straight to the Internet," Combes said.

Another driving force is the move by mainstream retailers onto the Net. Sears and The Gap opened Web storefronts in time for the hoped-for holiday rush, while Macy's and others added promotions.

Traffic on the Macy's online shopping site has quadrupled in the past three weeks. "We expect the traffic to peak on the site in the next ten to 15 days," said Kim Miller, Internet coordinator for Macy's. "We expect it to drop off a bit after the first of the year."

Lands' End and other catalogers refreshed their sites for the holidays, and Web merchants such as bookseller Amazon.com and auction houses Onsale and eBay are rolling out gift-giving features.

The ease of purchasing isn't the only benefit of online shopping. Consumers can also take advantage of the surge of comparison-shopping services such as Compare.net and Sharpshopper.com as well as "shopping agents" such as Excite's new Jango.

"You can do a lot of comparison-shopping in a very short period of time, even if you don't complete the transaction over the Net," said David Locke, analyst at Volpe Brown Whelan, adding that traffic alone can drive revenues without actual sales.

Many Internet retailers, however, aren't eager to be compared head-to-head to other Web storefronts, especially if price is the only variable. That's why analysts and online retailers such as Lands' End are stressing convenience.

"Convenience is the biggest thing," said Ron Frey, Lands' End Internet business manager. "We have real-time inventory checking from our Web site on all products, so customers will know if everything they order is in stock."

The online sites also add creative features to lure shoppers.

"We try to make Lands' End.com more than a shopping site," Frey added, noting features such as free electronic Christmas cards, a Santa mask printout page for kids, interviews with a reindeer farmer, and an upcoming "Santa Sightings" page.

Online stores hope that a successful holiday season will enable them to attract customers the rest of the year. "We would like to develop a strategy that results in consistent sales all year long," said Susan Finkelstein, vice president of special services at Macy's.

For example, Macy's is considering offering holiday shoppers a preview of next year's merchandise when they shop this season.

The bulk of online shoppers tend to be repeat customers. A study by Ernst & Young found that 41 percent of consumers who already have bought products on the Net plan to shop online during the holidays. About 55 percent of Amazon.com's customers have purchased books from the online bookseller before, said company chief executive Jeff Bezos.

"If we can get someone to try our site, the chances are good they'll come back and use it again," Bezos said.

If that holds true for other online merchants as well, this holiday could be a catalyst for more widespread acceptance of online shopping. "A broader range of people have now realized this is a trend, not a fad," said Scott Smith, analyst with Current Analysis.