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Christmas Gift Guide
Tech Industry

Web shoppers keep buying

Thanks to such factors as customer satisfaction and growth in Net use, the usual post-holidays retail-sales downturn apparently hasn't affected Web merchants as much as traditional retailers.

For traditional retailers, sales often decline after Christmas. But it's a different world online: Interviews with Net merchants and industry analysts suggest that online shoppers, after pulling back somewhat in January, are back in buying mode.

"We saw a huge spike for a number of weeks at Christmas, but we didn't see the kind of fall-off that you typically hear about in brick-and-mortar retail," said David Rochlin, vice president of marketing for online video store Reel.com. The privately held company declined to provide specific figures.

Judy Neuman, vice president of marketing for Eddie Bauer's online operations, reported similar results, saying that sales are above pre-Thanksgiving levels but haven't matched the Christmas rush.

Gadget shop Sharper Image reports a similar experience. "In the seasonal curve of our business, the absolute numbers are not as big as in the fourth quarter, because that's a prime gift-giving season," said chief financial officer Tracy Wan.

Sharper Image began in February breaking out its Web site sales, which totaled $383,000 in February, more than doubling February 1998's $189,000. For the year ending in January, Sharper Image logged $4.9 million in Internet sales, up from $1.6 million in the prior year. The fourth quarter, ending in January, accounted for $3 million of those sales, indicating that Sharper Image isn't totally dependent on the holidays.

Hard numbers like this are still scarce, but results from companies like Sharper Image hint at differences between pure online retailers and the brick-and-mortar merchants coming online.

Analysts attribute the trend to buyer satisfaction, an influx of new consumers coming online, aggressive promotions, and major ad campaigns by online retailers.

"A lot of people who had their first online buying experience [before Christmas] by and large were pleased with the experience and came back," said Lauren Cooks Levitan, analyst at BancBoston Robertson Stephens.

After Christmas, Forrester Research interviewed 10,000 online users, asking those who bought something last year whether they would buy online again before Thanksgiving this year, the traditional start of the holiday shopping season.

"A whopping 88 percent of Internet buyers said they will be shopping from now until November of 1999," James McQuivey, online retail analyst at Forrester. "Consumers use the Internet to buy things primarily for convenience and secondarily for value, and those two things are applicable all year round."

The largest Internet retailer, Amazon.com, boosted its number of registered users from 6.2 million to more than 8 million, MacQuivey noted.

"They were able to increase their base of people who have registered at Amazon by nearly a third and in a quarter when everyone was wondering if it had any punch to it," McQuivey said. "Last year's holiday season was not just an anomaly but indicative of broad changes in consumer buying patterns."

Rakesh Sood, who follows online retail stocks for Goldman Sachs, expects that Amazon will deliver higher revenues this quarter than it did in last year's fourth quarter, consistent with the company's direction to analysts.

But continued promotions appear to be key to successes so far. Reel.com benefited from an extended promotion around the Oscars, and Neuman said Eddie Bauer plans major efforts to sell gifts for Mothers Day and Fathers Day. At online shopping center iMall, however, traffic has fallen from December levels because of cutbacks in online advertising. "We've seen our traffic go down only because of fewer ads," said Richard Rosenblatt, iMall CEO, who says traffic is still up 300 percent from a year ago.

Traffic doesn't necessarily correspond to profits, however. "We think e-tailers overall will be faced with tight margins, as you have increased competition," noted stock analyst Kevin Wagner of Adams Harkness & Hill.

Online auctioneer Onsale is due to release quarterly results on April 15. Amazon is scheduled for April 22, and auction site eBay on April 26. Most traditional retailers will report quarterly results in May, but monthly sales figures for March are due on Thursday. Few major retailers break out their Internet sales.