Holidays to cement online shopping's presence
Internet retail will come of age this holiday season, according to e-commerce analyst Chris Vroom.
The number of online shoppers will mushroom during the holidays--pushing e-commerce revenues to an all-time high--and the fallout will drive the Internet marketplace out of retail's fringes, predicted Vroom, an analyst with New York-based Thomas Weisel Partners, in a teleconference today.
"We look for spending to triple per household," Vroom said. "Internet retailers will outperform their brick-and-mortar counterparts on the basis of price selection and convenience."
These predictions come as Internet retailers are facing mounting pressure to ensure their online stores can handle the crush of holiday traffic. In recent months, site outages and customer service difficulties at prominent e-tail sites have caused many analysts and consumers to doubt their capabilities.
Toys "R" Us, for example, will probably lose Internet sales this holiday season to online rival eToys because of continual technical problems at its Web site, Vroom said.
Such problems will anger customers who've been lured to the site with promotions, particularly those who are new to online shopping, Vroom said. They'll likely migrate to rival sites such as eToys, where they can find more selection and can access Web pages more quickly, he said. The problems could hurt Toys "R" Us' online sales for as long as a year, he said.
"This is exactly the danger of putting out significant promotional dollars to generate a lot of site traffic and ultimately failing to satisfy the customer,'' Vroom said.
Still, Vroom echoed predictions made by many Internet analysts: that the holiday season will fuel a huge growth spurt in the coming year for e-commerce. A prosperous economy and rising confidence in shopping online will help launch the industry, but it's the online companies' strategy of mass marketing and braving huge debt that has led to the rise in online shopping.
"Many observers have criticized eBay and Amazon for their spending," he said, referring to their lavish marketing and advertising campaigns. "[But], after all is said and done, many of the business strategies will be validated."
The number of Internet users grew 12 percent in the year through September 1999, which has led to a 23 percent rise in the total number of U.S. Internet users, according to a study by Thomas Weisel Partners. The growth showed no signs of slowing, the study found.
The number of households who shop online will jump from 17 million this year to 28 million next year, according to Vroom.
Thomas Weisel Partners ranked Santa Monica, Calif.-based eToys as the top online toy retailer, based on its analysis of seven toy sites for price, selection, service and convenience.
Bloomberg contributed to this report.