E-Commerce Snares Sales From Retail

Online shoppers in the United States spent $16.7 billion in the first six weeks of the 2004 holiday season, up 28 percent from the year-ago period’s $13 billion.

Music was the fastest-growing category year over year, up 33 percent to $871 million. The video/DVD and jewelry categories each rose 32 percent, to $1.6 billion and $1.2 billion, respectively. Book sales were up 27 percent to $1.33 billion while toys and video games hardware and software grew 22 percent to $1.93 billion.

The estimates were published in the Holiday eSpending Report from Goldman, Sachs & Co., Harris Interactive and Nielsen//NetRatings.

A key insight from the report is consumer comfort with buying non-commoditized items like jewelry over the Internet, said Nielsen//NetRatings senior retail analyst Heather Dougherty in New York. Another trend is the increased traffic to Web sites of bricks-and-mortar retailers.

“I’m seeing retailers like The Home Depot, Circuit City, Wal-Mart and Best Buy all experiencing double-digit growth week over week in traffic,” she said. “When you’re looking at the top sites in terms of the shopping destinations, it’s increasingly being dominated by multichannel retailers.

“Over the years, they’ve really got their act together, integrating their channels, driving people to stores using e-mails and Web sites to create one experience.”

Internet-only retailers like Overstock.com also have notched furious growth this holiday season. The site’s outlet format is in favor with consumers whose preference for price comparison-shopping was firmly established this year. Its wide availability of jewelry, consumer electronics, apparel and home products is a major attraction.

Amazon and eBay continue to lead lists of e-commerce sites during the holidays.

“Amazon and eBay are typically the top sites in terms of sales,” Dougherty said, “but they’re working off of large bases. So their traffic percentage of year-over-year growth is not as pronounced as the others. But they continue to be the top players.”

A forecast from comScore Networks, Chicago, claimed non-travel e-commerce spending — also excluding auctions and big corporate buys — in the November and December holiday season will cross $15 billion. This suggests a 23 percent to 26 percent increase over the same time last year. ComScore claimed consumers spent $13.1 billion from Nov. 1 to Dec. 17, up from $10.4 billion in the corresponding period last year.

Also, holiday e-commerce sales growth jumped in the five days ending Dec. 17. Shoppers spent an estimated $2 billion Dec. 13-17, up 49 percent over the corresponding week last year. Consumers spent an average of $400 million online each day during that week.

“Retailers of all sizes sounded the horn [in the week of Dec. 13] via e-mail and other means that consumers could order online and still receive gifts in time for Christmas,” said Dan Hess, comScore’s senior vice president. “And the option to buy online and pick up in-store is more popular than ever. It’s more available and stable than ever, and retailers are promoting it aggressively.”

ComScore predicts total non-travel quarterly e-commerce spending from October to December to break $20 billion for the first time this fourth quarter. It could mean a year-over-year rise of 24 percent to 26 percent.

The market researcher claims non-travel e-commerce spending for 2004 will increase 25 percent year-over-year to between $65.8 billion and $66.2 billion. Last year’s estimate was $52.9 billion.

“Our research over the past five years shows that once people start to buy online, their total online spending increases over time,” Hess said. “This growth is driven largely by an increase in frequency of purchase, which is also boosted by a growing range of product categories for which people are turning to the Web. Categories like jewelry and watches and home and garden are among the growth leaders.

“Some of this is certainly channel shifting. But an important component of the phenomenon is the increased efficiency that results for retailers and consumers alike.”

Retailers and observers of offline retail are making excuses for lackluster store-based traffic and sales. According to analysts in various media reports, there was no must-have item this year except in consumer electronics.

Poor offline retail sales over the Dec. 18-19 weekend were blamed on this holiday season being two days longer because of the leap year. In previous years, the lament for poor offline retail sales was that the season was two days shorter.

A Bigresearch survey for the National Retail Federation estimates that up to 20 percent of holiday sales will occur in the week before Christmas. The week after Christmas typically accounts for another 10 percent of holiday sales, as consumers redeem gift cards and look for sales.

According to NRF, 12 million consumers had not started their holiday shopping as of Dec. 19. But 73 million consumers concluded shopping and another 75 million were three-fourths done.

It is too difficult to estimate whether lower-than-expected store-based sales had anything to do with the spurt in e-commerce. The improved ability this year to let shoppers buy online and pick up in store eliminated lead times linked to shipping. Consumers also could buy later in the season.

Another possible reason for the slower traffic in stores is increased channel shift within the retail brand.

The prediction that e-commerce would become the province of established retailers may be coming true. But not all sales may turn out to be incremental.

“There’s definitely an impact against store sales in terms of holiday growth,” Dougherty said. “There’s some channel shift going on. But I wouldn’t attribute all of it to the Internet. Some of it is people spending less.”

Mickey Alam Khan covers Internet marketing for DM News.com. To keep up with the latest internet marketing news subscribe to our free weekly e-mail newsletter DM News Daily by visiting //www.dmnews.com/cgi-bin/newslettersub.cgi

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