In its second-largest acquisition, Amazon buys the company for $970 million.
While bricks were mixed, a rising tide of online sales lifted all sleighs.
Overall retail news during the holiday shopping period was mixed: Wal-Mart, for example, was expecting flat same-store sales in December while Federated Stores Inc. was expecting gains in its department stores. Meanwhile, total retail sales-excluding gasoline and food-were up 6% or so. Online retail selling news, however, brought good cheer. Through Dec. 18, sales were up 25%, reaching $20.65 billion from $16.46 billion a year earlier, according to comScore Networks Inc.
And the rising tide of online sales was lifting all sleighs. Even at Power Equipment Direct, a store one might not think of as a top holiday destination, online sales were setting records. Sales for Dec. 1-11 equaled sales for all of December 2005, with air compressors topping the list. “Air compressor sales take off with the holiday season,” says founder Jon Hoch. “We’re surprised at how well they sell as gifts.”
My favorite things
Power Equipment Direct is a web-only retailer that operates three niche sites: AirCompressors.com, ElectricGeneratorsDirect.com and PressureWashersDirect.com. 60% of sales are to consumers. Hoch attributes the holiday season gains to increasing the number of paid-search ads, improving the web sites for natural search rankings, offering an expanded product line and adding site features that help customers shop. Sales for the year were expected to reach $15 million, up 58% from 2005.
If air compressors aren’t enough evidence that consumers have become comfortable buying anything online, then Abebooks.com offers more: From mid-November until holiday shopping tailed off about a week before Christmas, sales at the used, rare and out-of-print book site were up 25% over the previous year. And one shopper bought a first edition of Charles Dickens’ “A Christmas Carol” for $7,500. “We created a Holiday Bookshop as our hub for shoppers browsing for gifts and that worked really well,” says COO Boris Wertz.
Spurred by greater penetration of broadband Internet access in homes, peak shopping days are becoming more widely distributed. There has been a lot of debate-and conflicting reports-over when the peak occurs. And the issue is more than academic-retailers need to know when to gear up technology and staffing to handle their busiest times. ComScore, which monitors web use, says the busiest day was Dec. 13, with $667 million in online sales, up 29% over 2005’s busiest day, Dec. 12.
The peak moment for online transactions occurred at 12:43 p.m. on Dec. 12, according to payment processor Cybersource Corp., which monitored payments at its client sites to determine the busiest times.
Another interesting development of the year was the emergence of evidence that online shopping is occurring more evenly throughout the season. For instance, visits to retail web sites on the Friday after Thanksgiving were up 42% over the same day a year earlier, comScore reports.
Furthermore, Cybersource reports that the difference between the highest and lowest volume online shopping hours is diminishing. From Dec. 3-9, the difference between the lowest and the highest number of transactions in an hour was 160%. For the corresponding week in 2004, the difference was 300%. “The graphs are flattening-albeit with much higher numbers. Online shopping is not only getting bigger, it’s becoming more of a 24-hour phenomenon,” says Doug Schwegman, Cybersource’s director of market and customer intelligence.
Among the factors influencing that change are the spread of broadband into the home-nearly 66% of Internet homes have broadband now and 75% of online shoppers access the Internet through broadband, according to recent studies-and the increasing globalization of online sales. “We know from our latest fraud survey that many of our large merchants have 17% or more of their volume coming from outside the U.S. Just last year that percentage was 14%,” Schwegman says.
No fun and games
With strong growth in traffic and sales this year, even some of the biggest online retailers were unable to meet demand. Performance at Amazon.com slowed on Thanksgiving in connection with the promoted sale of the XBOX 360. Walmart.com experienced severe slowdowns beginning at 4:30 a.m. Eastern on the Friday after Thanksgiving. The site eventually became unavailable to a majority of users, with normal performance finally restored at 2:30 p.m., according to Keynote Systems Inc., a web performance monitoring company. Macys.com also experienced significant slowdowns starting at 5 a.m. Eastern Time on the Friday after Thanksgiving, with normal performance restored at 2 p.m.
A record number of visitors at Overstock.com Tuesday, Dec. 5-many looking for the new Pirates of the Caribbean DVD, which Overstock was promoting at $9.99-caused intermittent performance problems for the e-retailer. Many visitors were unable to access the site, which, in turn, prompted Overstock.com to turn off the inventory feed for the DVD and post a “sold out” message. “Consumer response to the promotion was beyond anything we imagined, and we had a big imagination,” says Patrick Byrne, CEO.
Amazon, Walmart.com and Overstock were not alone in facing capacity problems, says Gomez Inc., which monitors web site performance. “Nobody anticipated the volume that web retailers experienced,” says Matt Poepsel, vice president and general manager at Gomez. “We saw unprecedented demand; many retailers already are vowing to do better next season.”
Most large web retailers normally do sophisticated web performance testing and benchmarking before the start of the holidays to troubleshoot traffic-related problems. But testing is only a predictive measure and many retailers probably didn’t anticipate all the volume they are seeing this Christmas shopping season. “The demand is mind boggling,” says Poepsel. “Retailers test as much as they can, but it’s still an imperfect science.”
The problems that retailers faced may have led to a slight dampening of customer satisfaction with online shopping. Or it may have been the well-tested phenomenon of rising consumer expectations: The more they see what some sites can do, the more they expect from all sites.
Customer satisfaction with the e-retail experience during the first week in December dipped slightly from the previous week, according to ForeSee Results Inc.’s weekly Holiday Online Retail Benchmark. ForeSee helps retailers measure and manage customer satisfaction. As measured from Dec. 4-10, aggregate customer satisfaction with online retailers in the benchmark study was 76.5 on a 100-point scale, 0.2 point lower than the previous week. However, that’s nearly 2 points below the score measured during the same period in 2005.