Online holiday sales expected to soar

Retailers and customers more comfortable, savvy

December 05, 2003|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

Internet shopping - a fast-growing phenomenon but still a sliver of total retailing - might be seeing a breakthrough this holiday shopping season, according to executives and analysts who follow online trends.

Various retailers have reported record online sales and Web sites not prepared to handle a surge in traffic. Experts point to various factors, from an increase in high-speed connections in homes to more sophisticated Web sites to shoppers' worries about crowds, fueling the appeal of online shopping.

"Three Christmases ago, it was a horror show online," said Harrison "Lee" Rainie, director of the Washington-based Pew Internet in American Life Project. "The press was full of coverage of people getting wrong gifts, wrong sizes and missed delivery dates. There's since been a big shakeout in the online retail world."

Bizrate.com, a California site that compares prices online, reported that overall Internet sales increased 30 percent on Thanksgiving Day 2003 compared with a year earlier, to $197 million from $151 million.

The Sears, Roebuck & Co. Web site was so busy during the holiday, with shoppers trying to get a leg up on deals such as $30 DVD players, that the Chicago-based retailer posted triple the sales it did the previous year.

"We were pleasantly surprised," said Willy Medina, a spokesman. "We hope this happens every year." Sears expected some extra traffic because it was offering Thanksgiving Day specials exclusively online for the first time but said it got much more business than expected.

The next day, on the traditional start of the holiday shopping season known as "Black Friday," online shoppers were so busy tying up Web sites overall that one in five couldn't complete a purchase, according to Keynote Systems Inc., a Silicon Valley company that tracks Internet performance.

And as early as the week leading to Thanksgiving, traffic on eBay Inc., the auction and shopping Web site, jumped 36 percent compared with the corresponding week a year earlier.

Jupiter Research of Darien, Conn., projects Internet sales will rise 21 percent to $17 billion for November and December, excluding travel and auction sites, compared with those months last year. Forrester Research Group of Cambridge, Mass., predicts online sales will increase 42 percent to $12.2 billion from Thanksgiving to Christmas, including Internet and auction sites.

Predictions for holiday shopping overall are much less rosy. The National Federation of Retail Business expects a more modest 5.7 percent increase in overall retail sales.

The surge in the use of the Internet to shop - still less than 2 percent of all retailing even as it has doubled each of the past few years - is attributed to various factors. Not the least is that consumers are becoming more savvy computer users and less afraid of having their credit card numbers in cyberspace, observers said.

"The more experience people have online, the more comfortable they tend to be and the more likely they'll shop online," said David Berkowitz, a spokesman with New York-based eMarketer.

The technology is also improving. More sophisticated search engines make it easier to find products. Type in "baby seat" today, and you won't end up with a thousand Internet listings for day-care centers, as was common years ago.

The increase in broadband, or high-speed, Internet connections in rural areas as well as metropolitan ones is also aiding shoppers, although many marketers still bulk up their operations during weekdays because so many people shop while at work, where the computers and connections are often much more advanced than at home.

Retailers, fearful of and mystified by the Internet at first, are also paying greater heed to the trend, officials said. A few years ago, retailers set up "bare-bones" Web sites as they worried about losing sales to the Internet. But sellers are increasingly investing manpower and marketing in their e-tail operations - even adding specials that can be accessed only online or wooing shoppers with free shipping.

Best Buy Co. Inc., the Richfield, Minn.-based electronics retailer, is promoting its site in its stores on kiosks and banners and promotes "hot deals" accessible only at BestBuy.com.

Ebay introduced gift certificates for the first time this year and began identifying "hot toys" early so that if they sold out in stores, its site would have them in stock.

And Circuit City Stores Inc., the Richmond-based electronics chain, has a "Holiday Gift Center" at its circuitcity.com; it allows consumers to order merchandise online and pick it up from a store within 15 minutes.

Keynote Systems cautioned that many retailers could be losing potential online sales because their Web operations can't keep up with demand.

Many retailers need to learn how to better react to high demand, Keynote analyst Roopak Patel said: "Anytime you close your door to a potential buyer you're losing a sale."

Much Internet shopping remains the computer-age equivalent of "window shopping," as many people search and compare prices online but ultimately buy in person, analysts said. But Internet companies are trying to tap societal concerns about time pressure and crowded shopping centers during the holiday season. America Online dispatched an e-mail yesterday noting that its members were discussing "the woman who was trampled in a shopping stampede at a Florida Wal-Mart."

"For some, the convenience element is more prevalent than the bargain," Rainee, the Internet researcher, said of shoppers. "They don't have to go to crowded malls and stores."

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