In its second-largest acquisition, Amazon buys the company for $970 million.
The trend is up as consumers are more comfortable buying online and the number of online buyers grows-–but retailers face a shortened core selling season.
If Holiday 2001 was a bang-up year for online retail – 28% growth over the previous year while the rest of retail only inched forward – then Holiday 2002 will deliver something on the order of a respectably loud pop, according to Jupiter Research. Jupiter’s just-released forecast for the holiday selling season calls for 17% growth over last year, or about $13.2 billion, buoyed by online sales growth that Jupiter says is up 22% through this year’s second quarter.
A projected 11% increase in the number of Internet users and a 24% increase over last year in the total online buyer population will help drive sales growth. Tempering the growth rate, however, is a slight decrease in average spending as the online audience grows more mainstream and dilutes the more affluent base of early adopters.
This year, retailers must grapple with a shorter selling season. “Because Black Friday [the day after Thanksgiving] falls on Nov. 29, the core selling season is a paltry 19 days, ending on Dec. 17. After that, most online retailers cannot comfortably guarantee orders shipped by lowest-cost means will arrive in time,” says Jupiter analyst Ken Cassar.
As a result, online retailers will have to work hard to capture sales with strategies such as encouraging early purchasing. And because peak demand will fall within a compressed period of time, call center, warehouse and web-based operational systems will need to be staffed up and in top working order to handle it, Cassar adds.
Consumers who choose to shop online rather than in other channels this holiday will do so largely for reasons of convenience, Jupiter found. The possibility that they’d find lower prices online, one of the top three reasons consumers gave for shopping online prior to the last holiday, has slipped into fourth place this year. But when it comes to picking one web merchant over another vs. whether to shop online or off, price tops the list of shoppers’ criteria. A whopping 73% said price was the attribute that would influence their choice of online stores this holiday, while only 56% cited low-cost shipping, the second most popular reason.
That said, consumers still found reduced shipping the most appealing of potential discount offers online such as dollar discounts and percentage discounts. But to stay on the upside of such offers, Jupiter notes, web merchants must tightly control such promotions with offers that are timed rather than open-ended, require a minimum order size and leave sufficient gross margin for postage and handling.
Due to the shortened season and tighter shipping deadlines, “Consumers who procrastinate may have to buy offline, taking sales away from remote retailing channels,” Cassar says.
But multi-channel retailers who prepare for it can benefit from the shoppers’ end-of-season shift back to the store channel. In the last few days before last Christmas, The Sharper Image used the web to offer a $10 discount off a $50 store purchase to get shoppers into its stores. It also used the web to promote virtual gift certificates, redeemable in any channel, that could be delivered instantly online. That campaign, marketed with the tagline “Turn being late into being great,” produced a 20% to 30% lift in additional units of sales in the last few days of the season.