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E-shopping's coming-out party

Analysts say e-commerce is ready to blast into the mainstream this holiday season, though there are still some areas where online shopping has room to improve.

Internet commerce analysts project various billions in online sales this holiday season, but the most staggering statistic emerges from a study performed for Dell Computer.

In a survey of 1,943 computer users with online connections, pollster Louis Harris and Associates found that 43 percent said they are likely to buy something online by Christmas. Last year, only 10 percent did so.

That's huge, even more CNET holiday guide so when the millions of consumers who got their first PC last Christmas are considered. No wonder the pundits, who base their estimates mostly on what retailers say, are forecasting big jumps in holiday buying. Meanwhile, those bullish predictions are fueling a run-up in the stocks of Internet retailers.

"Last year we were in the early adopter phase," Genni Combes, Internet retail analyst at Hambrecht & Quist, said in a late-summer interview. "Now it's going to hit the mainstream in terms of consumers getting comfortable on the Net."

Jupiter Communications estimates $2.3 billion in holiday spending this year, up from $1.1 billion in 1997--that represents 46 percent of total 1998 online sales outside travel. Forrester Research is even more bullish--it predicts $3.5 billion for the fourth quarter, $7.8 billion for the year.

How big is big?
Even with those optimistic predictions, online shopping still has a long way to go. A recent study by Boston Consulting Group for merchant group Shop.org points out that Internet shopping accounts for less than 1 percent of North American retail spending. BCG predicts $13 billion in online sales this year.

That percentage may begin to shift this year, however, as more big brick-and-mortar retailers launch their first efforts online.

"Particularly as folks like Macy's enter the picture, they can quickly add to [holiday revenues]," Forrester analyst Kate Delhagen noted.

Clearly consumers feel safer buying online than in the past, when worries about credit card security kept some from shopping on the Net. In part, familiarity with the Net may breed comfort, but this year Visa also has done an about-face on Internet shopping, which it now is actively promoting.

Last year, the largest credit card company was conspicuously silent, but this year it is spending millions on high-profile TV ads that tout online toy store eToys as one of those merchants that "won't take American Express."

Convenience is key
Obviously, one of the major benefits drawing holiday shoppers online is the convenience--similar to the explosion in holiday shopping via catalog a few years ago.

America Online, one of the largest online shopping venues, has released a survey that found 85 percent of online shoppers say it's easier than traditional shopping. Of AOL members who shop online, 94 percent say they'll probably do it again, the same percentage of users that have recommended it to a friend.

AOL's holiday strategy is simple: Lure online "window shoppers" into buying, then keep them coming back. The same goal has portal sites such as Yahoo and Excite pushing online shopping as well.

"Every week during the last month, we seen that 20 percent of the buyers making purchases on AOL are first-time buyers," Wendy Brown, AOL's vice president of e-commerce, said in a statement.

Retailers have been gearing up for months
For brick-and-mortar retailers, holiday shopping is a make-or-break season, and most observers expect that to carry over to online merchants. Serious Web retailers have been preparing for Christmas since mid-year.

Amazon.com expanded Holiday shoppers expected to flock online from books into music, videos, and other gifts in time for the holiday. In August, it also acquired the Junglee service for comparison shopping.

Online stores think shopping agents such as Junglee are so important that they went shopping themselves--Excite snared NetBot 13 months ago, and Inktomi acquired C2B Technologies in September, leaving the independent agent field open for newcomer mySimon, which launches its holiday guide today.

"The whole price-comparison shopping space is very attractive to the user," said Aberdeen Group analyst Mark Peabody.

For virtual stores, customer acquisition is critical, because a large percentage of online buyers do make another purchase and repeat buyers are far more profitable than enticing new ones.

Getting e-shoppers to buy gifts
Not all of the predictions are rosy, however. Recently, Jupiter found that though consumer e-commerce is up, online shoppers aren't buying many gifts online, at least prior to the holiday, and that has Jupiter analysts scratching their heads. Some 59 percent of online shoppers said their gifts represented less than 10 percent of their online purchases.

"The online market is ripe for gift purchases, and it has not been exploited to date," analyst Ken Cassar wrote in an October report, noting that merchants already or will soon provide most of the features shoppers say keep them from buying gifts online--inability to ship to a recipient, lack of personalized card, and a paucity of advice.

Gift registries will begin to flourish, Jupiter predicts, with 29 percent of merchants surveyed saying they plan to offer some form this quarter.

Overall, many analysts expect this holiday season to mark the mainstream acceptance of online shopping.

"Last year, consumers only experimented with shopping online," Andrea Williams, research analyst at brokerage Volpe Brown Whelan, said in a statement. "In the past 12 months, consumers have been come more comfortable with the Internet.

"Holiday shopping may never be the same," she added.