Creatures were stirring, especially the mouse
While bricks were mixed, a rising tide of online sales lifted all sleighs
By Kurt Peters
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.
“Compared to last year, we don’t see a big difference in how web sites are performing, how products are priced, or in any of the many factors that affect customer satisfaction with online shopping,” says Larry Freed, president and CEO. “So what’s to blame for the large decrease in satisfaction from 2005? It’s got to be the rising expectations of online shoppers.”
Good times
However, shoppers who completed online purchases that week gave a customer satisfaction score of 84.8, 2% higher than the previous week. “The good news this holiday season is consumers that are completing their purchases online are having very good experiences,” Freed says.
In spite of the slight slip in satisfaction, retailers were expecting to be able to deliver on customer expectations with regard to shipping, and many were pushing online shopping almost to the limit when it came to deadlines. 39% of 76 polled online retailers reported they would guarantee that standard shipping orders placed by Dec. 18 or 19 would be delivered by Christmas Day, according to a poll of e-retailers by BizRate Research, conducted for the trade group Shop.org. That proportion is double the 19% who last year promised delivery by Christmas for orders placed on those dates.
32% of retailers’ standard shipping deadlines were Dec. 15, 16, or 17 and 23% were Dec. 14. Only 6% pushed deadlines hard and promised standard delivery for orders placed Dec. 20 or later. BizRate pointed out that the cut-off dates were even more aggressive than they appeared because with Christmas on a Monday there was one less business day for delivery than there was last year.
But if retailers promised, consumers believed—and acted. “The growth rate of online retail spending accelerated during the latter part of Dec. 11, with sales on Friday, Dec. 15, growing 38% vs. the corresponding day last year,” says Gian Fulgoni, chairman of comScore. “This demonstrates consumers’ willingness to rely on retailers’ late-season shipping guarantees.”
Slipping satisfaction or not, consumers clearly love online shopping, as sales growth at retailers across the spectrum showed. As mid-December approached, 25% of e-retailers reported sales up 50% over last year while half reported sales up 25% or more, according to BizRate. Moreover, compared with the previous year, 68% said average order value increased and 85% said site traffic was up.
Batteries included
Sales at Batteries.com outstripped the market. “November sales were up 43% and December is on track to do that, too,” Dale Petruzzi said as the end of online holiday sales approached.
Ritz Interactive, which operates camera, fishing and other niche product sites, reported early holiday sales were up more than 40% over the previous year, due largely to strong demand for digital cameras and customer response to a promotion in Google Checkout that offered $20 off purchases of $50 or more.
Sales at MusicNotes.com, a retailer of downloadable sheet music, rose 44% year-over-year during the two weeks following Thanksgiving, as it averaged nearly 3,400 downloads per day and added more than 12,000 customers.
Online sales at K&L Wines, which sells on the web at KLWines.com, rose 37% year-over-year during the first week of December, after November sales rose 19.2%. For the full year K&L is projecting a 35% year-over-year increase in online sales compared with 22% for overall sales, vice president Brian Zucker says.
Sales at LetsTalk.com, a retailer of mobile phones and related products and services, increased 145% year-over-year on Thanksgiving Day, then rose 137% year-over-year on the following Monday.
At Moosejaw Mountaineering, holiday web sales were up 70% compared with last year and business was getting busier. Major reasons for the growth were the launch of two new e-commerce sites, snowboarding site theJaw.com and sale items site TheLowdown.com, and the shipping over Thanksgiving weekend of the multi-channel retailer’s 64-page holiday catalog. “The new sites have been huge sources of growth for us, and the catalog has driven a ton of sales online,” says Jeffrey Wolfe, COO and CFO.
And at Shopping.com, a major online comparison shopping site, traffic to merchant partners’ sites rose 40% on the Monday after Thanksgiving.
All in all it was another booming holiday season online, with relatively few glitches that would result in unhappy children on Christmas morn. l
kurt@verticalwebmedia.com
