In its second-largest acquisition, Amazon buys the company for $970 million.
Online’s stellar holiday shopping season was retailing’s bright spot-- e-shopping doubled while overall retail was flat.
Retailing in general may have experienced flat sales during the holiday shopping season, but that’s not the story on the Internet. Most web measurement services are reporting a stellar year for e-retailing, both in number of shoppers and in consumer satisfaction.
Online retailers spent a year fixing fulfillment problems that plagued the 1999 holiday shopping season, and it paid off. Although the methods and what they count differ from report to report, all web researchers report significant growth in Q4:
- A Goldman Sachs/PC Data study reports that consumers spent $8.9 billion in November and December, nearly double the $4.5 billion a year earlier (see table).
- While it measures things differently, Forrester Research pegged the 2000 holiday shopping season at $10 billion. Forrester includes travel and event tickets in its figures. Forrester reported that in 1999, consumers spent $5 billion.
- Los Angeles-based consumer ratings service BizRate says shoppers spent more than $6 billion online during Q4 2000, with more than 52 million orders placed online between Nov. 20 and Dec. 26. That was a 60% increase from the $3.75 billion in sales and 38 million orders during the same period in 1999. On top of that, the average ticket increased significantly as well. Based on BizRate’s results, the average ticket during the fourth quarter was $115, up from $98 in Q4 1999.
- Shop.org, the online retailing arm of trade group National Retail Federation, and Boston Consulting Group report that online shopping grew 76% this year, although that study does not report dollar figures or traffic volume. The growth is projected from a survey of 35 online retailers. Shop.org/Boston Consulting also report that the average ticket at those retailers during holiday shopping increased 27%.
While the numbers bode well for the future of online shopping, the challenge to retailers for this year will be to increase consumers’ confidence in the delivery systems so they will continue to buy closer to Christmas.
The 2000 holiday shopping round turned out to be the season when brick-and-mortar retailers finally got online and reaped the benefits of their multichannel muscle.
Citing Yahoo! Shopping statistics, Forrester says that retailers with a multichannel presence tripled their holiday sales in 2000 over 1999, while overall sales for Yahoo! merchants doubled. Forrester expects traditional retailers to focus this year on combining databases for catalog, online and store to boost loyalty and sales.
The king still reigns
Jupiter Media Metrix, which measures web site traffic, also reported the 2000 shopping season as being the year for brick and mortar, citing Wal-Mart, Best Buy, American Greetings and Staples as those with strong performances. Jupiter reports that Wal-Mart grew 640% over its 1999 sales and online traffic increased from 50,000 per day in 1999 to 370,000 during 2000.
Kmart Corp.’s BlueLight.com did even better. It reported a 1,000% increase in sales this Christmas over last, proving that the year it just spent revamping and improving its site was not in vain, however. The jump was not enough to boost BlueLight into PC Data’s Top 20; it ranked 32.
Neilsen/NetRatings, a research and ratings service, reported that seven of its top 10 e-retailers were brick-and-mortar retailers.
But the Internet king is still the same old king. Despite the surging offline retailers, pure-play Amazon.com was still the top online retailer for the second year in a row-and it experienced a 47.8% increase in traffic.
A number of factors caused the dramatic growth in online sales. For one thing, bad weather drove consumers to their computers. Blue- Light.com says it experienced a boost in traffic from each new locale as the December snowstorms moved across the country.
BizRate says the growth was also the result of online merchants’ cleaning up their fulfillment acts, ensuring that orders were filled and delivered on time. On-time delivery, which ranked last in BizRate.com’s audit of customer satisfaction in 1999, moved up to third place this year. More than 88% of online orders were delivered on time, up from 74% last year. BizRate says that this improvement may have encouraged repeat purchases from satisfied customers. BizRate reports that online shopping peaked at $254 million on Dec. 18.
Consumer satisfaction is likely to translate into sustained online sales. The Goldman Sachs/PC Data surveys reports that 80% of online consumers say they are likely or extremely likely to shop online again. Nearly 60% said their online shopping experience was better than the previous year.
The good news was not spread evenly, however. Goldman Sachs/PC Data report that sales of consumer electronics grew 118% this year, books/music/video online sales grew 68%, but toy sales grew only 37%.
Results from the 2000 holiday shopping season point to an area that retailers will have to address this year if they want to maintain the Christmas shopping momentum. Sales slowed dramatically during the week of Dec. 17, indicating that consumers don’t have the faith in delivery before Christmas once the holiday is less than a week away.
Nielsen/NetRatings’ Holiday E-commerce Index, which measures home and work shopping trips to representative e-commerce sites in eight product categories and among major e-retailers (including Amazon, eToys, CDNow and Target.com), showed a spike of 68.4 million shopping trips during the week of Dec. 10. Traffic dropped 7.5% to 63.3 million visits the following week. NetRatings says it expected that merchants’ assurances that they could deliver on time would extend the shopping closer to Christmas. But consumers apparently weren’t buying it; the drop-off occurred at the same time as the previous year.
James Okamura, senior partner at J.C. Williams Group, says retailers have a long way to go to encourage consumers to do their last-minute-or even last-week-holiday shopping online. “Internet retailers don’t have consumers who are accustomed to the last-minute shopping spree like offline retailers do during the last week of shopping,” he says.