Late shoppers flock to Net

Retailers say last-minute gift-seekers boosted online holiday sales beyond expectations.

2 min read
Online merchants say online holiday shopping boomed, but analysts say the real challenge lies ahead--turning holiday shoppers into regular customers.

"The real challenge to merchants is to hold onto those customers," said David Baltaxe, e-commerce analyst with Current Analysis. "What do they have to do to keep them coming back as repeat customers? That will be the real challenge of next few months."

"We thought sales would drop off around the 20th [of December], but until the 22nd, we got orders that we thought were gifts,'' said Jonathan Morris, executive vice president of brand-name clothing discounter Bluefly. "Orders over the weekend probably went back to our early to mid-November level,'' which still is better than the company expected, he said.

But now the real work starts for cybermerchants--getting the droves of first-time shoppers to return to the Net to make more purchases. America Online, for example, has seen more than 1 million new shoppers this holiday season, and its stock soared today.

While some Net retailers are "wondering if the bubble will burst," Baltaxe believes the savviest ones will use the data collected over the holidays to convert holiday shoppers into year-round buyers.

Some online retailers immediately shifted into retention mode the day after Christmas, posting inventory-cutting prices. AOL launched a Mega Clearance Sale site on Christmas Day, and Bluefly is considering online gift certificates next year, which could extend the buying season. Some online merchants offered "Internet-only" sales.

While some conventional stores are reporting lower-than-expected sales, online merchants and analysts say they expect larger than expected results. Jupiter Communications isn't updating its $2.3 billion estimate on holiday shopping, but Forrester Research thinks its $3.5 billion estimate for the fourth quarter, including online travel booking, was met.

"All the other surveys confirm that at least 2.1 million households shopping online for the first time in the fourth quarter, and that easily gets to the $3.5 billion that we projected," said James McQuivey, Forrester senior analyst. AOL said earlier this month that shoppers were spending over $250 on average.

SkyMall, the nation's largest seller of goods through catalogs on airplanes, said today its Internet sales for the fourth quarter tripled to $1 million, from $300,000 a year ago, and full-year Internet sales rose sevenfold. It had 15 million hits, for December, more than three times the hits from a year earlier. SkyMall's stock soared today, up 185 percent to 35.8750 in afternoon trading.

Sharper Image, a retailer of unusual gadgets and electronic toys, said last week that sales through its Internet site rose sixfold from December 1 to December 21. That compares with a rise of 9 percent in the same period for its stores open at least a year, the company said.

Bloomberg News contributed to this report.