December 23, 2009, 12:00 AM

Small web retailers expect better times ahead in 2010

A year ago the worst recession in decades wreaked havoc on holiday sales for many small web retailers. This Christmas more merchants say business has improved, and they forecast better conditions in 2010.

A year ago the worst recession since the Great Depression wreaked havoc on holiday sales for many small web retailers, especially luxury goods e-commerce sites that depend heavily on discretionary consumer spending.

But as niche online retailers close out the current Christmas shopping season, more merchants say business has improved this year. More CEOs also expect web sales to gain momentum in 2010.

After revenue dropped 40% year over year from July through November for GourmetGiftBaskets.com, an online retailer that specializes in high-end gift baskets, sales so far this December are up 30% over December 2008, says CEO Ryan Abood. In the run-up to the end of this Christmas shopping season, GourmetGiftBaskets.com has sold out of its most expensive items: personalized gift baskets with up to 30 gourmet items that range in price from $150 and $250. “Last year many customers purchased lower-priced baskets, but this December we’ve been blown away by the sales activity,” Abood says. “The fact that sales this December are up by so much more than last year tells me that consumers and businesses are feeling a little better about the economy and not cutting back as much. Next year looks to be better.”

With more Christmas orders coming in, GourmetGiftbaskets.com, the fastest-growing Top 500 web-only retailer with 2008 sales that rose 173% to $12.0 million from $4.4 million in 2007, expects to finish 2009 with sales up about 12% to 20%, Abood says. “We’re more optimistic that the economy is turning the corner, and that’s good because our sales are really driven by the big holidays.” GourmetGiftBaskets.com is No. 446 in the Internet Retailer Top 500 Guide (a PDF version of the company’s financial and operating profile can be ordered by clicking on its name).

For online jeweler Goldspeed.com Inc., holiday orders are up, but not nearly as much as in previous years, says CEO Neil Kugelman. Still, he says, online Christmas shoppers are buying a steady stream of merchandise that ranges in price from $300 to $400. “We were helped by the big East Coast blizzard these last five or six days and that has made me cautiously optimistic about how the holiday shopping season will end,” Kugelman says. “We’re selling lots of traditional items such as watches this year more so than we did last year.” Goldspeed.com won’t know for another few weeks how total sales in 2009 will wind up, says Kugelman. But indications that online shoppers are feeling somewhat better about the economy and placing bigger holiday orders than a year ago is an encouraging trend for 2010, he says. “If we see a sales increase in January, that will be a very telling sign,” says Kugelman. “We should have more confident shoppers next year based on what we are seeing these last couple of weeks.”

As the holiday shopping season winds down, the small web merchants that survived 2009 can likely anticipate better business conditions in 2010, says Paula Rosenbloom, managing partner at Retail Systems Research LLC. “Many small web retailers are happy just to have survived and to do that they had to provide excellent customer service and offer their customers extremely competitive pricing,” she says. “This year was a make or break year for a lot of small online retailers and if they made it to the holiday season, they’re probably in good shape for 2010. Congratulations to the survivors.”

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