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**Stars Fade for Internet-Only Retailers as Holiday Lights Go Up

When Jim Peterson placed an order July 31 for a coffee table, a pair of end tables and two CD cabinets from Furniture.com, little did the Pennsylvania clinical data coordinator know that the Web site was teetering on the edge of bankruptcy.

More galling, Peterson never got notice from the Framingham, MA, retailer that it was closing its doors for good Nov. 6. Now, he is one disillusioned customer looking to get his $204.27 deposit back.

A message on Furniture.com's home page reads in part, “Furniture.com has placed customer deposits and payments into an escrow account in order to safeguard availability of the funds for refund. Eligible customers who have not otherwise received refunds will be contacted by the escrow agent within approximately 60 days with instructions on how to submit refund claims.”

Still, Peterson plans to be more cautious from now on.

“I'll be a lot more cautious about doing anything online anymore now,” Peterson said, “unless it's something like a Sears or a Gap, someone who has concrete stores in front of me.”

Peterson's experience may not be unique, as a bevy of Internet-only retailers has recently folded up: Furniture.com, Pets.com, online grocer Streamline.com, garden.com, health products shop MotherNature.com, and cosmetics stores eve.com and beautyjungle.com.

While the situation certainly does not bode well for Web-only retailers that have yet to build a strong brand, most predict it won't chill consumer online spending overall.

“A lot of the retailers are going out of business because they didn't attract as many consumers and as many dollars as they wanted,” said Seema Williams, senior analyst at Forrester Research, Cambridge, MA.

“If eToys went out of business, that would be a problem. If Amazon went out of business, that would be a problem. But the eve.coms and the garden.coms don't have too many customers. It's not a huge set of consumers that are going to be upset about these companies going out of business. And look at the categories — they're not huge.”

And market researchers are still gung-ho on the online shopping channel.

The NPG Group Inc., Port Washington, NY, estimates that online sales this holiday season will reach $12.5 billion. PricewaterhouseCoopers, Columbus, OH, projects fourth-quarter e-commerce sales at $10.2 billion, almost double 1999 numbers.

Jupiter Communications, New York, predicts that 35 million consumers in the United States will buy gifts online this holiday season, up from 20 million who shopped online in 1999.

However, Nielsen//NetRatings, which measures work and home visitors to e-commerce sites in 10 categories, showed that the holiday season had yet to begin, with zero percent growth the week ending Nov. 5 versus the previous week.

This slow start to online holiday shopping can be attributed to several factors, the New York market researcher said. Distractions could include the presidential election impasse, decreased advertising by Internet-only retailers and the shakeout in the dot-com market.

The flameouts of the stand-alone players could not be more ironic in timing. Witness the recent highly publicized relaunches of Wal-Mart.com, target.com, BestBuy.com and VictoriasSecret.com, and the e-commerce debuts of lowes.com and anntaylor.com — all online arms of multichannel, brand-name retailers.

“There's a lot of branding going on now with consumers nervous about where they want to shop on the Internet,” said Tom Wyman, San Francisco-based online retail analyst at J.P. Morgan Securities. “They do want to gravitate toward companies that are known for delivery and are capable of keeping their information private and perhaps have bricks-and-mortar stores to which products can be returned.

“While [in the] physical world it's location, location, location, on the Net it's brand, brand and brand, and Internet-only retailers don't have the household brand name.”

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