The Need for Value Drives Consumers to Internet

With at least three independent surveys indicating that consumers will
spend less on gifts this holiday season, the need to maximize dollars
is driving shoppers online to e-tailing websites in droves.

Amazon on Friday reported that customers worldwide
have already ordered more than 24 million items for the period of Nov. 1-28,
according to its Holiday Delight-O-Meter. Because the Delight-O-Meter debutted Nov. 9, 2001, no year-ago comparison is available. While the online shopping giant
attributed the surge to a number of heavily discounted items, experts said
the decision
by the company (as well as its competitors like eBay) to
stick with free shipping as a promotional tool also helped attract shoppers.

“Methods to further reduce spending levels are clearly popular with
consumers this year,” said Lee Smith, president of Stamford, Conn.-based
InsightExpress, a professional online marketing research firm. “Free
shipping, greater discounts, and price comparisons are emerging as critical
success factors for online stores this holiday season. The successful sites
understand this.”

As further evidence of recent trends, on Friday FAO Inc., the operator
children’s retailers FAO Schwarz, The Right Start and Zany Brainy, said it
did not expect to meet its previously issued revenue and earnings guidance
due to restrained consumer spending.

Further hurting mall-based and department store sales was the benefit for
online shoppers of price-comparison services like Pricegrabber and Dealtime, which Nielsen//Netratings recently ranked as the third most-popular
shopping sites on the web.

And, according to company officials, this ability for the consumer to
click to compare prices is an added benefit for the partner merchants listed
on Dealtime’s service. By increasing the knowledge base of shoppers and
raising their level of comfort with transactions, Dealtime claims to
generate a visitor-to-buyer conversion that is roughly twice that achieved
by competing sites.

Meanwhile, Microsoft said on Friday that traffic to the MSN Shopping service
is up 50 percent this November, as compared to the same time last year.

Traditional “bricks” retailers this year do have a leg up on their online
counterparts in terms of the limited number of days shoppers have during the
holiday season. The 2002 holiday shopping season (Thanksgiving to Christmas)
lasts only 26 days — that’s six fewer days consumers have to complete their
holiday shopping compared with 32 days in 2001, meaning less time to wait
for orders to be shipped and delivered.

But in a study conducted by Harris Interactive for Amazon.com, nearly 70
percent of Americans said crowded malls and long lines were the worst part
of holiday shopping. If everyone had a magic genie to either go to the mall,
send holiday cards, wrap or send gifts or attend holiday parties for them
this holiday season, two in five Americans (40%) would want that genie to go
shopping at the mall, the Harris poll said.

Harris Interactive conducted its study via telephone with a regionally
representative sample of 1,000 Americans ages 18 or older between October 25
and October 28, 2002. The margin of error for the total sample is plus/minus
3.1 percent.