December 26, 2000, 9:55 AM

You`d Better Watch Out

(Page 2 of 2) ran a big risk by ramping up its site in late November -right in the middle of the holiday season. It marked the end of a dramatic change for the Vancouver, Wash., company, which closed all of its retail stores in February 1998 to go strictly virtual, and eventually morphed three Web sites into one. A key issue for was delivery. Unlike JCPenney’s or Brooks Brothers’ online divisions, a virtual retailer such as must rely on outside sources. “You depend on the vendor getting the merchandise to the shipper and the shipper getting it there in one piece,” says Hough. “We learned that relationships with vendors and delivery services are as important as the ones with customers.”

Internet retailers also learned that online holiday shoppers don’t differ that much from their conventional counterparts strolling the malls. It’s all about pleasing the customer, no matter how many cool graphics you throw at a Web site. John Roman at Brooks Brothers says, “We intentionally built the site to keep it ‘less is more,’ not clutter the site with anything that wouldn’t enhance the shopping experience.”

The mainstream media helped create the buzz about online shopping. It certainly didn’t hurt marketing efforts when national publications made it front-page news. The heavy press coverage, no doubt, helped tempt Internet users to click on a banner ad for, say,

Virtual retailers supplemented their sponsorship deals with major search engines or online providers by purchasing offline media, too.

Marketing online offline found radio to be effective. JCP fed off its synergy with its corporate siblings-marketing in JCPenney stores (and on shopping bags) and in the company’s catalogs. JCP also launched a special holiday home page on its site that featured 28 gift items that could also be found in the catalog, and then promoted the items in print and on television. CyberShop spread the word about its Furby supply with newspaper ads, TV commercials and radio promotions. For example, went wide with print, advertising in USA Today and The New York Times. believes its targeted e-mails to existing and new customers helped generate repeat business. “Valentine’s Day sales were up 800% over last year,” Sharples says, “and that’s because of our successful holiday.”

Meanwhile, the experts have checked in with their assessment of the holiday season. While there was much to celebrate as far as sales figures, there were a few lumps of coal in the stocking as well. A Jupiter Communications NFO Interactive survey pointed out that online shoppers’ satisfaction dropped during the holiday season from 88% last July to 78% in December. The top three problems cited by customers: merchandise availability, additional costs of shipping and handling, and slow site performance.

Making a list

Jupiter Senior Analyst Nicole Vanderbilt warns that unless online retailers address these key issues, the boom in virtual buying could slacken. “The combination of retailers that launched or relaunched their sites within weeks of the holiday season, coupled with significant unanticipated increase in traffic, led many sites to underperform,” Vanderbilt says. “If they do not shift their efforts to alleviate technology issues and improve customer service, they risk losing the customers they spent so much to acquire.

But there is a lot to build on going into the 1999 season. Holiday ’98 was online retailers’ coming-out bash, their chance to make a sterling first impression on a host of excited, yet skeptical, shoppers.

“Online shopping is a leap of faith,” says Sharples. And shoppers were leaping in unprecedented numbers in November and December. Everybody expected that the 1998 holiday season would exceed sales for the same period in 1997, the first time e-commerce registered significant revenue.

But computer users bought music, books and videos in such numbers that they blew away the experts’ predictions. While a hard figure is difficult to pin down, even a lower-end estimate ($3.14 billion, by Jupiter) still represents a near-threefold increase over the previous year. One report even calculated sales as high as $8 billion.

According to an InfoBeads study, the number of American adults who made holiday purchases via e-commerce tripled from 1997 to 1998 to about 8.2 million, with more than 32 million adults visiting online shopping sites. A Zona Research survey says that the average shopper bought $629 worth of merchandise online during the holiday season, up from $216 the previous year.

The season had legs, too. The number of unique visitors at shopping Web sites grew significantly from November to December, according to Media Metrix, which tracks audience measurement. But it’s difficult to calculate how individual retailers performed. Many companies with a catalog division don’t break out online sales numbers. Privately held companies will only say that holiday sales performed “beyond expectations.” Some of this uncertainty might be cleared up in 1999. The Commerce Department announced in February that, for the first time, it will start asking companies to break out online sales figures, instead of lumping them in with catalog sales.

Uncertainty is a key word in the world of online retailing these days, including figuring out how to keep customers clicking away during the holiday season. Nobody seems discouraged about the results from holiday ’98, however. “We will ramp up now,” says a spokesman for barnes-, “and keep ramping up heading into the season.”

Ray Paprocki is a business writer based in Granville, Ohio.

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