Internet boosts retail figures

Online shopping rises 24%, makes season jollier one for sellers

December 28, 2005|By JOHN SCHMELTZER AND MARY ANN FERGUS | JOHN SCHMELTZER AND MARY ANN FERGUS,CHICAGO TRIBUNE

A 24 percent jump in Internet sales from last year helped ward off an otherwise lackluster Christmas shopping season for the nation's retailers.

Consumers' growing comfort with Internet shopping coupled with aggressive campaigns promising gift deliveries by Christmas - even if ordered as late as Dec. 23 - helped propel Internet sales to the best showing since online sales records began being tracked in 1999. Electronic sales rose to an estimated $20 billion compared with $4.7 billion six years ago.

"I try to do as much as possible online," said Jay Carroll, of Palatine, Ill., who said he used his computer to buy a digital camera for his wife and a skateboard and accessories for his 11-year-old son. "I like the convenience, and I'm not a shopper."

Strong Internet ordering helped push overall retail sales up at least a full percentage point, according to Gian Fulgoni, founder and chief executive of Reston, Va.-based ComScore Networks Inc., which tracks consumer behavior. Sales of gift cards, about $20 billion this year, added another full percentage point to retail sales, he said.

That's a big boost for retailers who rely on the December holiday shopping season for 25 percent of total sales. This is the time of year their books go from red to black.

MasterCard International's MasterCard Advisors unit said sales, adjusted for the extra shopping day between Thanksgiving and Christmas, rose an estimated 5.2 percent compared with the same 29-day period a year ago. If you add the extra shopping day, sales were up 8.7 percent this year.

The adjusted 5.2 percent increase is just short of the 6 percent projected by the National Retail Federation for the Nov. 1 to Dec. 31 shopping period - but it is nearly double the dismal 2.8 percent sales increase that had been recorded halfway through this year's holiday period.

"It was a solid increase this year, but not generally spectacular," said Michael McNamara, vice president of research and analysis for MasterCard Advisors' Spending Pulse, a retail sales data service that tracks sales on the MasterCard network augmented by estimates of spending using cash and checks.

Fulgoni said the growing impact of Internet shopping was especially visible during last week's three-day New York City transit strike. New York and Long Island shoppers turned to the Internet en masse for their last-minute shopping.

During the first two days of the transit strike, Fulgoni said, his researchers tracked a 28 percent increase in the share of online spending by New York residents.

He said Internet shopping levels could rise drastically as more stores review how much online sales affected their bottom lines.

Shopping centers across the country said shoppers returned in force Monday to begin cashing in gift cards or exchange unwanted presents.

"Retailers have recognized that December has 31 days," said Marshal Cohen, chief analyst at NPD Group Inc., a market research firm based in Port Washington, N.Y.

In an effort to prop up profits, a growing number of stores such as Coach, Target and American Eagle Outfitters rolled out spring merchandise while KB Toys was pushing new versions of Barbie and the funky Bratz dolls.

Consumer electronic chains such as Best Buy were highlighting CDs, DVDs and video games in their advertising, counting on shoppers to feed the gadgets they received for the holiday.

However, some consumers said rising heating bills and other expenses had forced them to cut back.

"I'm just browsing, more or less," said Foster Williams, 56, a Chicago actor, who sat sipping a cup of vanilla ice coffee outside the Nordstrom department store on Chicago's Michigan Avenue. Williams said he spent about $1,000 on Christmas presents last year.

But that didn't happen this year.

"I didn't buy any gifts," he said, explaining that he is facing a large dental bill and a heating bill that is double the one he received a year ago.

Tim Newbold, 28, of Chicago, said he and his wife, Karla, are on a tight budget because she is in medical school while he is working as a legal assistant before taking the bar exam this spring.

Like many other consumers, they bought more gifts online this year and saved money by making early purchases that didn't require expensive quick shipping and offered good deals, especially on books.

They even found a way to provide gifts for those who seem to have everything. Newbold said they made donations in someone's name to projects being undertaken by their church, such as buying a goat for a family in Ethiopia.

"Some people loved it," Newbold said. "Others thought we were cheating them out of a real present."

John Schmeltzer and Mary Ann Fergus write for the Chicago Tribune. Wire services contributed to this article.

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