E-tailers find hope in holidays

A strong season for Web stores may bode well for the coming year in e-commerce, even as offline retailers weather their worst holiday sales in decades.

Paul Festa Staff Writer, CNET News.com
Paul Festa
covers browser development and Web standards.
Paul Festa
5 min read
A strong season for Web stores is expected to bode well for the coming year in e-commerce, say online retailers and analysts, even as offline retailers weather their worst holiday sales in decades.

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From Nov. 25 to Christmas Day, shoppers spent $7.9 billion, up 23 percent from the comparable period last year, BizRate.com reported Thursday. Spending on the last weekend before Christmas Day was $297.6 million, up by 92 percent compared with the same weekend last year. Online shopping peaked Dec. 9, BizRate.com said.

"There are more people online than ever before, and more of those people are spending money online," said Lisa Strand, director and chief analyst with Nielsen/NetRatings. "You can expect that kind of behavior to continue all year."

Holiday shopping totaled $13.4 billion from Nov. 2 to Dec. 20, up 18 percent from last year, according to Nielsen/NetRatings.

The growth in online holiday shopping cuts a sharp contrast to the general holiday retail gloom, and on Wall Street even retailers that did brisk business online are finding themselves tarred with the brush of their offline counterparts' failure.

Shares of Amazon.com, for example, dropped $1.58, or more than 7 percent Thursday, to $20.30, on news that Wal-Mart and other retailers had either hit the low end of their holiday forecasts or missed them altogether.

But Amazon, while not disclosing actual sales, called this season its "busiest holiday season ever." The online retailer said it customers ordered more than 56 million items from its stores in the United States, Canada, Japan, France and the United Kingdom from Nov. 1 to Dec. 23.

Even brick-and-mortar retailers that did well this season said they did even better online.

While its brick-and-mortar stores reported modest growth of 7 percent, the Sharper Image saw its Internet sales leap 68 percent, while catalog sales and infomercials rose about 36 percent.

"We are particularly gratified to see the strength in our Internet and catalog mail order businesses all the way through the last days of the holiday shipping season," Sharper Image Chief Executive Richard Thalheimer said in a statement, hailing "robust" holiday sales. "It is remarkable to have achieved these sales increases without the heavy discounting that seems so prevalent among other retailers this year."

The e-commerce holiday cheer comes, thanks to the vagaries of the calendar, in the shortest possible holiday shopping period. In 2002, there were 26 days between Thanksgiving and Christmas; last year there were 32.

Recalculated to add another six days to the calendar--that is, counting Nov. 19-24, 2002--this year's online holiday shopping grew by a whopping 43 percent to $9.18 billion, trouncing 2001's $6.43 billion of holiday spending, according to BizRates.

One online retailer suggested that, squeezed for time, shoppers opted to stay home to shop.

"Intuitively, you would say online retailers were going to be hurt," said Amazon representative Bill Curry. "But instead it put a premium on people's time, so they flocked to the Internet and to Amazon to save time rather than wasting it sitting in traffic and looking for parking at malls."

Whatever their motivation, shoppers crowded Web retailers in the past six weeks. About 10 million people bought online every week of the season--starting as early as October, according to comScore Networks. That's up more than 30 percent over the same weeks last year.

"The sheer number of people buying online this year was extraordinary," said Dan Hess, vice president of comScore Networks.

Hess agreed that the influx of shoppers to online stores over the holidays would translate into a reinvigorated e-commerce sector in 2003, painting "a very bright picture" for online retailers.

Hess cited a sharp and continuing increase in the number of people spending money online, and the expectation of repeat buyers from that growing group. People who bought online last year and again this year spent 37 percent more the second time around, according to comScore. They also spent 50 percent more than those who shopped online for the first time this year.

Increasing broadband penetration would also contribute to an e-commerce rebound, with 27 percent of home Internet users connecting with a high-speed connection. That's up almost 10 points over last year, Hess said.

"That's important because we know from our data that broadband connections correlate with increased buying," Hess said.

Peering deeper into the tea leaves of this season's online holiday receipts, Hess suggested that categories once thought to be ill-suited to Web shopping are doing remarkably well, while e-commerce mainstays such as compact discs are suffering amid a general slump in music sales.

While many analysts came to the conclusion that people would resist shopping for clothes online, preferring an in-store experience where they could touch and try on garments, comScore saw brisk online clothing sales. That trend preceded the launch last month of Amazon's online clothing store.

Microsoft's MSN portal, which claimed a 50 percent rise in traffic over last holiday season, said that while in prior years consumer electronics was the most popular holiday shopping category on MSN, apparel was the most popular this year.

Amazon called its apparel launch the busiest of any in its history, judged by the number of items sold in the past 45 days.

Computers, consumer electronics, books and CDs, by contrast, exhibited little growth at best, according to comScore.

Despite those findings, MSN said that movies, music and books continued to account for "a high percentage" of online sales, and named digital cameras, MP3 players, wireless networking and Microsoft's Xbox gaming system as hot items.

MSN Shopping reported more than $1 billion in sales the week following the Thanksgiving holiday.

eBay, another popular online shipping site, doesn't break out results for the holidays, a company representative said Thursday.

In addition to the growing population online and higher bandwidth, online retailers may be reaping the benefits of their own marketing innovations.

These include features like virtual fitting rooms and policies that let people buy something online and pick it up or return it at a brick-and-mortar store.

Circuit City, for example, saw half its online sales picked up from retail stores after urging customers to shop this way, according to Nielsen/NetRatings.

Ultimately, the fortunes of e-commerce may rise as shoppers become more accustomed to the experience.

"What's clear is that shopping online has become a mainstream," said Amazon's Curry. "It's become an 'Oh yeah' kind of shopping option as opposed to an 'Ooh, I'm going to try this out' kind of thing."