Internet shopping took off in 1998

Holiday spending rose to $2.4 billion, double what was spent in 1997

January 05, 1999|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

In 1996, online bookseller Amazon.com sold more copies of "Creating Killer Web Sites" than any other title. Last year, as consumers with more conventional tastes overtook their "techie" predecessors in cyber shopping, Tom Wolfe's "A Man In Full" became the favorite.

Consumers who once only surfed the Web for software and hardware are shopping online for apparel from Gap Inc. and toys from FAO Schwarz, bringing Internet retailers their biggest holiday season yet -- and nudging the Internet a step closer to mainstream retailing.

"This was definitely a breakthrough year for online shopping, not only for the increase in the number of consumer shoppers, but also the increased awareness of Internet shopping by more mainstream retailers coming on line, such as Macy's or Hickory Farms," said Melissa Bane, an Internet marketing strategy program manager for Yankee Group, a Boston market research firm.

FOR THE RECORD - A page one article in yesterday's editions reported that consumers will pay no sales tax for products purchased online through 2002 because of a moratorium imposed by Congress. However, consumers who buy from retailers with a physical presence in their state are still required to pay the state sales tax. The Sun regrets the errors.

Yesterday, America Online Inc., the No. 1 online service, said members spent $1.2 billion at its Internet stores during the holiday shopping season. Of its customers, 1.25 million shopped online for the first time, AOL said.

"These are the people that will drive e-commerce through the year," said Wendy Goldberg, an AOL spokeswoman. "Electronic commerce is really changing the way people shop, much like enclosed shopping malls did in the '70s."

Of the first-time AOL shoppers, 98 percent said they would likely shop online again within six months, she said.

Analysts estimate that online shoppers spent about $2.4 billion on holiday purchases, an increase from 1997's $1.2 billion, but still only 1 to 1.5 percent of total holiday retail spending.

The average Internet shopper spent $629 for goods and services last year -- double the spending in 1997, according to a survey by Zona Research and IntelliQuest. Consumers spent $7.2 billion online for all of 1998, Bane said.

"The Internet is poised to become a more mainstream shopping medium," said James McQuivey, senior analyst in online retail strategies for Forrester Research Inc. in Cambridge, Mass.

"It's just on the verge. In two to three years, we will not talk about the Internet as an unusual place to buy things."

Between now and 2003, McQuivey said, 30 million households will shop online for the first time. Through 2002, consumers will pay no sales tax on product purchases -- thanks to a three-year moratorium imposed by Congress to give a commission time to study the complexities of tax collection.

Expectations of continued strong sales have whetted investors' appetites for Internet-related stocks, sending shares of Amazon.com Inc. and Barnes & Noble Inc. soaring. Even so, Amazon isn't expected to post a profit anytime soon.

In coming months, online retailers will be focusing on capturing new consumers as they come online, McQuivey said.

One of AOL's newest online retailers, Bluefly.com, an online designer fashion outlet store that carries such brands as Ralph Lauren, Calvin Klein, Prada and Donna Karan, has attracted consumers by allowing them to personalize their own "catalog," said Ken Seiff, chief executive officer of Bluefly Inc.

"We only show you the stuff that matches all your criteria. For instance, if you're only interested in Nike, Ralph Lauren and Donna Karan and want to see all the products except bathrobes and scarves," Seiff said.

The strategy is paying off. Orders grew 700 percent for each week in a five-week period, beginning Nov. 1, he said.

"If you create a better mousetrap, people do find it," he said. "There's no question we're providing a service to the consumer that's never been available before."

Amazon.com, which sold $147 million in books in all of 1997, sold $153.7 million in books in just the third quarter of last year, when total sales for the first nine months of the year were $357 million, said Bill Curry, a spokesman for Amazon.com.

"As people have dabbled with it and had a successful and safe experience and have told friends and family members, it has taken off," Curry said.

The books, music and video retailer had four times as many orders the day after Thanksgiving last year than the day after Thanksgiving in 1997, he said. In the first quarter of the year, sales rose above the previous quarter, even though it included holiday shopping.

McQuivey said those companies that sell exclusively online will need to expand their product selection. Amazon.com plans to move beyond books, music and video.

Already, many online retailers have started advertising off-line, on television or radio, while some are offering promotions such as free shipping or a discount on the first purchase.

Pub Date: 1/05/99

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