January 4, 2006, 12:00 AM

Holly jolly online shopping

Online sales were up 23% in Q4 as consumer confidence in e-shopping and retailers` ability to provide a better experience both improve.

Holiday online shopping during 2005 generated tremendous buzz-mostly because some smart marketer at the National Retail Federation coined a term to apply to the Monday after Thanksgiving-Cyber Monday. The mass media picked up on the term immediately, and many applied it to the day without even realizing its recent provenance.

It became part of the vernacular so fast that by mid December, Google was listing 700,000 pages with the term on it. But by industry standards, 2005 was more of the same-sales up nearly 25% over the year before with consumers buying a broader range of gifts online.

The 9th busiest day

In the hype over Cyber Monday, many in the media jumped to the conclusion that it’s the biggest online shopping day of the year. Far from it-it’s only the 9th busiest day. What is true about Cyber Monday is that sales growth on that day was on a par with sales growth in the rest of the season. So from that perspective, it served as an indicator of things to come.

But if anybody really needed signs of what lay ahead, all they had to do was look at what had been going on all year. Through the third quarter, online sales were up 23.6% to $54.87 billion from $44.4 billion a year earlier, comScore Networks Inc. reported. The pre-season predictions were that Q4 would match that growth-and it did.

Through Dec. 16, when most expected that online holiday shopping was pretty much wrapped up, consumers spent $15.86 billion online, up 23% from sales through that period last year, when they spent $12.85 billion, reports comScore Networks Inc. The busiest day was Dec. 12, with the second busiest day Dec. 13.

In a competing report, The Goldman, Sachs & Co., Nielsen/NetRatings and Harris Interactive Holiday eSpending Report says that online shoppers spent $18.6 billion from Oct. 29 to Dec. 9, up 16% from the year earlier. That index reports that as of Dec. 9, 19% of consumers said they had not started their holiday shopping.

In past holiday seasons, Mondays were the biggest online shopping days of the week. That appears to no longer be the case. ComScore reports that even though Monday Dec. 12 was the busiest day, two Tuesdays (Dec. 13 and 6, in that order) a Wednesday (Dec. 14) and a Thursday (Dec. 8) ranked higher than the next Monday, Dec. 5, which ranked sixth. Another Wednesday (Dec. 7) and a Friday (Dec. 9) ranked higher than the Monday after Thanksgiving. The data clearly show, however, that consumers are shopping at work, in spite of the spread of broadband to the home. No Saturday or Sunday ranked in the Top 10 shopping days after Thanksgiving (see box, p. 21).

A changing shopping dynamic

However, some retailers experienced weekend spikes and that leads some to believe that the office-shopping dynamic might be changing. LetsTalk.com, a seller of cell phones and calling plans, experienced one of its busiest days on Dec. 11, two Sundays before Christmas. Sales that day were 11% higher than the Monday after Thanksgiving and 128% higher than the comparable Sunday the year before.

“The notion of consumers buying in stores on weekends and online on weekdays is becoming outdated,” says Delly Tamer, founder and CEO of LetsTalk. “We know that the weekends leading up to Christmas are when consumers traditionally go through their to-do list for gift buying. As more consumers have high-speed Internet access at home and are more experienced with buying online, the distinctions between completing these purchases in a store or in your home are going away.”

Even retailers whose products aren’t necessarily thought of as holiday gifts experienced boosts during the shopping season. Sales at MontanaLegend.com, seller of premium Angus beef, were up 20% last year over the year before. Dec. 5 was its biggest shopping day and sales that date were double what they were for Dec. 6 (two Mondays after Thanksgiving) last year. Hewlett-Packard Co.’s HPShopping.com also experienced big sales growth in Q4. “We’re ecstatic with the results,” says Peter Moreo, director of sales and merchandising.

Retailers report they are pleased with their marketing efforts this holiday season. “The open rate for our Thanksgiving e-mail this year was 53%, up from about 30-35% last year,” says Claudio Miranda, vice president of online flower retailer Organic Bouquet Inc. Overall sales were up 250% year-over-year through mid-December, he adds.

At Drs. Foster & Smith Inc., sales from paid search are up 81% over last year while sales from natural search are up 65%, says Gordon Magee, Internet marketing and data analysis manager. He also reports that from Nov. 1 to Dec. 15, web site visitor traffic was up 19%; browser traffic, which Drs. Foster & Smith defines as shoppers who visit two or more pages, was up 29%; and session traffic was up 29%. “Search-related sales and traffic continue to expand, with no end in sight,” Magee says.

In addition to Q4 marketing that created immediate sales, systems investments are paying off for online retailers. HPShopping, for instance, invested throughout the year in systems that it expected would pay off during the holiday shopping period-and they did. “We made significant investments in the customer experience side, including creating a persistent shopping cart, improving the ability to cross-sell and personalizing the experience,” Moreo says. “They were very well received.”

Night and day

In addition, with aggressive pricing, HP was able to create gift demand for computers. For instance, Moreo notes, HP had desktops available as low as $299. “More desktops are being given as gifts as prices come down,” he says. He also says HP experienced strong holiday shopping demand for its compact photo printers, its new line of TVs and its portable printers.

At Backcountry.com, system upgrades and staff expansion that started early in the year helped make the difference in driving record sales over the holiday season. The company racked up a record $860,000 in orders on Dec. 12, the day it had earlier predicted would be its biggest day of the season.

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