Last year, e-tailers found out there is no Santa Claus. This year they’re hoping there’s still a Christmas.
As the fall ’99 shopping season approached, many e-tailers saw the projected record amount of online spending as a golden opportunity to capture permanent customers, vault into positions of market leadership and move boldly toward profitability.
For nearly all of them, it turned out to be a cruel season of false hope. While there indeed was a record amount of holiday online buying activity, e-tailers of all kinds were plagued by stock shortages, Web site crashes and fulfillment problems.
Worst of all, thanks to heavy advertising campaigns, competition-driven discounts and costly customer incentives such as free delivery, nearly all e-tailers spent far more than they took in during last year’s fourth quarter.
Soon cash began drying up as venture capitalists cut their losses and plunging stock prices left publicly traded e-tailers emaciated. The demise last week of Pets.com, MotherNature.com and Furniture.com was just the latest leg of this year’s brutal e-tail death march.
As if all that isn’t enough to set the stage for a cheery Christmas, the first Holiday E-Commerce Index report from Nielsen/NetRatings shows that seasonal shopping is off to a slow start.
Last year, according to Nielsen/NetRatings, traffic to many e-tail sites soared in the first week of November. So far this year, there has been no such holiday spike.
Which doesn’t mean we won’t eventually see more online spending this holiday season than last, when consumers dropped $7 billion to buy goods, services and travel-related items such as airline tickets and hotel reservations. Jupiter Communications predicts $12 billion in Internet spending in November and December. Others predict similar Web shopping totals for this fall.
But as we saw last year, record spending doesn’t translate into profits, not if you’re losing money on every item you ship or sinking millions into glitzy promotional campaigns. (I know a certain unemployed Sock Puppet who would concur.)
Of course, there won’t be much glitz this year; few e-tailers can scrape together enough funds for a flashing banner ad, never mind a seven-figure multimedia buy.
Bottom line: When the Q4 reports start rolling out in late January, don’t expect online merchants to unveil any Christmas miracles. That’s something investors should keep in mind as they look for bargains in this down market.
Thank God They Respect Democracy
On Monday I warned that “all indications are that the stock market will continue to plunge each day until a new president is determined. That, in turn, will bring incredible pressure to bear on one nominee or the other to concede.”
In the 27 hours or so since that dire prediction was posted, the Nasdaq has risen more than 8%, while internet.com’s Internet Stock Index has gained 9.4%.
Having one’s finger firmly on the pulse of the market…it’s a burden, I tell you.
