The e-retailer reports a $126 million net loss, stemming from a $640 million year-over-year increase in spending in the quarter on technology and content ...
Consumers continued their shift to the web channel, and their satisfaction goes up with volume
It was a milestone in online shopping-e-retail sales for the week that ended Dec. 7 exceeded $2 billion for the first time-26% above sales for the corresponding week a year ago, according to comScore Networks Inc. numbers. And it was also symbolic of the entire online shopping season.
From the beginning of November until mid December, comScore reports that consumers spent $9 billion in online retail shopping, 28% higher than a year ago. Less than a week before Christmas, comScore was projecting total November and December online sales of $12.1 billion to $12.6 billion, a 25-30% increase over a year ago. Meanwhile, total retail sales for the year appeared by mid December to be on track for 5-6% growth. “With the Internet, consumers now have the capability to shop with surgical precision and it gives them a level of confidence,” says Dan Hess, vice president of comScore. “They’re procrastinating this year to an extent that would have given them white knuckles in the past.”
But things could have been better, say companies that monitor retail web sites. Starting the day after Thanksgiving, heavy traffic killed transactions at many retail web sites, reported Keynote Systems Inc., provider of web site performance and management services. During the peak shopping period of 11 a.m. to 2 p.m. Eastern time that Friday, consumers could complete a transaction only 80% of the time, says Keynote’s E-Commerce Transaction Performance Index. Throughout the entire day-from 7 a.m. to 10 p.m. Eastern time-the success rate was 89.1%. By comparison, the success rate on the day before Thanksgiving was 98.4%.
Like at the mall
And the day after Thanksgiving was not an aberration, Keynote says, reporting that even through the week of Dec. 7 there were times when the success rate reached only 80%. The overall success rate for that week was at a six-week low, Keynote says, coming in at 93.68%. It improved to 95.98% for the week of Dec. 14. Keynote defines a transaction as a web site’s ability to allow a consumer to click through a number of pages and successfully make a purchase. The average success rate for the last three weeks in November and first week in December was 94.49% to 96.68%. Keynote measures traffic to 13 retail sites.
Keynote was not alone in finding problems with retail web sites. Gomez Inc., which monitors 20 retail sites, found a slowdown in ability to complete a transaction as the shopping season progressed. By the middle of December, consumers on dial-up connections were taking 95 seconds to access a site, complete a search, click on an item and add it to a shopping cart. That was up 5 seconds from early November.
The increasing delay was due almost entirely to increased traffic, says John Lovett, senior performance analyst for Gomez. “It’s like going to the mall on a Saturday afternoon; you’re going to find long lines,” he says.
Lovett says the problems arise primarily as customers engage retailers’ back-end systems. “Home pages and searches are processed fast,” he says. “Retail sites get tripped up when the customer puts things in a shopping cart and engages the site in more intricate tasks, like inventory checking.”
Gomez has contracts with 10,000 computer users worldwide to allow Gomez to test web sites from the computers whenever they are online, through dial-up as well as low broadband such as cable and high broadband such as T1 lines. It measures the amount of time it takes to access the home page, enter a term into the search box, get the results, click on the first result and place it into a shopping cart before abandoning the transaction. Low broadband users average 27 seconds and high broadband users, 13 seconds.
More orders, lower tickets
In addition, Jupiter Research studied 239 home pages in December and found that 14% contained bad links, including delivering the infamous 404 Page Not Found message at 24 sites. While it didn’t report separately on retail sites, Jupiter says retail was a significant component of the study.
In spite of such problems, consumers are buying online, as evidenced not only by the comScore numbers but by other researchers as well as online merchants. Shopping and comparison site BizRate.com, for instance, reports that consumers placed 64% more orders online this year over last, although the average ticket was down 25% from $136 to $103, says Chuck Davis, CEO. He attributes the lower average ticket to the lessening influence of computer hardware purchases.
Among individual retailers who revealed their online holiday shopping results before Christmas, footwear retailer Shoebuy.com said sales were up 100% in December over a year ago; outdoor gear retailer Altrec.com reported sales growth of 94%; home furnishing retailer Bombay Co. reported that web sales were up 60% year-over-year; and outdoor gear retailer REI.com said sales were growing at double-digit rates, without being more specific. Internet traffic monitoring and analysis company Hitwise reported that retail traffic on the Friday after Thanksgiving accounted for 8.96% of all web traffic, up from 6.74% a week earlier.
Bluefly.com also noted that sales did not taper off by Dec. 17, as they did last year. “By this point last year, our holiday season was beginning to wane,” says president Ken Seiff. “But this year it continues to be strong. Traffic is up, average order size is up and margins are strong as we’ve been less promotional than ever before.” In fact, the eSpending report from Goldman, Sachs & Co., Harris Interactive and Nielsen/-NetRatings reported that by Dec. 15, only 31% of online shoppers had completed their shopping and 24% of those who intended to shop online hadn’t even started by that date.
While customers, like Bluefly’s, were shopping later in the holiday season, they also started earlier. The eSpending report said that 51% of respondents started their Christmas shopping in November, up from 43% who started in November last year.
The broadband effect