September 1, 2006, 12:00 AM

Analysts: Gas and fear likely to fuel holiday sales

As retail analysts and researchers finalize their 2006 holiday online forecasts, one thing seems clear: web sales will be a lot higher than last year. How much higher depends partly on how well prepared retailers are for new opportunities.

Retail analysts and research firms still are finalizing their 2006 holiday forecasts for online retail spending. One thing, however, already seems clear: online sales will be significantly higher than last year. The question of how much higher is a function of trends and events forecasters still are assessing, and ultimately how well retailers are prepared to move on what opportunities come their way.

To the extent that this year’s back-to-school season online can be taken as a preview of fourth quarter activity, it should be a strong holiday season, predicts Helen Malani, chief shopping expert at shopping engine Shopzilla. “With the greater adoption of broadband in homes we’re seeing changing shopping patterns, such as more shopping late at night, after dinner and early in the morning. This is all helping to drive sales,” she adds.

Less driving also will be driving sales, experts say. Most forecasters are citing high fuel costs as a likely key contributor to higher online sales this holiday season. A gas price study conducted by Shopzilla at the end of July determined prices were ­increasing the amount of online shopping for about one-third of the online shoppers it surveyed. 11% of the 1,011 survey respondents reported they already were shopping online “a lot more” in order to save fuel costs associated with shopping offline; 23% said they’ve increased online shopping “somewhat more” in response.

On a related note, the extent of terrorist threats or activity here or aboard also may have an effect on consumer confidence and ­willingness to spend in Q4, some industry observers say. But one potential side effect is that this fear and concern could increase rather than dampen online spending. “If consumers shift their plans and are going to be doing less traveling, that might leave more to spend online on other things,” contends Mary Brett Whitfield, analyst and senior vice president at consultant firm Retail Forward Inc. The firm in May forecast total e-commerce growth at 25% in 2006 as well as for the fourth quarter.

Beyond such external influences, online retailers’ Q4 results also will depend on how well they are prepared-and how willing they are to continue to adjust plans and strategy as the season progresses. “The days of indiscriminate spending on search and shopping engines are over,” says Craig Smith, president of retail consultancy Trinity Insight. “In the past, I’ve seen businesses make keyword lists and just let them go, not monitoring nor optimizing them. But as early December comes around, forward–thinking retailers will shift toward the keywords that convert, and more will be using bid management tools that may not have used them in the past.”

Smith adds another trend that could play out online this holiday season: greater interest among online retailers in print advertising. More multi-channel retailers will employ print to drive sales to the web, he believes. “That way folks can shop catalogs and inserts before the season. I wouldn’t be surprised if someone like an Overstock.com, for instance, produced a catalog to send to their house lists.”

 

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