A Rosy Outlook for Holiday E-Commerce

The economy may be hurting, but e-commerce is booming, according to Los Angeles-based research firm BizRate.com. On the heels of a healthy third quarter for U.S. e-commerce, which according to BizRate.com’s statistics clocked in $10 billion in online retail sales (a 37 percent jump over last year’s numbers), expectations are high for the approaching holiday shopping season.

So high, in fact, that BizRate.com is predicting online sales over the holiday season to peak at $8 billion, a 24 percent increase over last year, bringing in $16.9 billion for the entire fourth quarter, which marks a 35 percent increase.

But are estimates too rosy for the holiday season at a time when the economy is weak and consumers are more inclined than ever to tighten the belt straps on extraneous spending?

According to David Schehr of GartnerG2, the outlook is as good as BizRate.com is predicting, and better.

This is due in part, says Schehr, to the simple fact that more people are comfortable shopping online and that e-commerce still accounts for only 1 percent of overall worldwide commerce.

“If they just buy a little more online of what they buy generally, it would be a sizable increase,” said Schehr. “We’re up to the point where there are more than 75 million people buying things online and that experience base is growing. We’ve also had a few good years of performance and since 2000, it’s been smooth sailing in terms of consumer experience.”

Schehr pointed out that one of the contributing factors to e-commerce debacles in the past, which turned many consumers away from online shopping, particularly around the holidays, was just part of a learning curve for both consumer and retailer.

“Consumers learned they can’t order a product on December 23rd and expect it on the 24th,” said Schehr. “There was a lot of flash in the pan back then, and now what we’re going to see more of is that the Internet is looked at as an integrated channel by brick-and-mortars. It’s just another way of ordering things.”

In an upcoming report on fourth quarter business-to-consumer commerce, GartnerG2 is predicting sales to be up at least 30 percent.

“The benefits to online shopping in a tough economy are the 24/7 access to merchandise, which saves time and money,” said BizRate’s President and CEO Chuck Davis. “The fact that Internet merchants tend to include shipping deals, which is the number one incentive, along with the absence of sales tax, make this holiday season online a robust one.”

With women still leading the online shopping demographic at 58 percent, another lure for budget-constrained holiday shoppers is that in a bumpy economy, price shopping becomes a fun sport, says Davis, adding that 85 percent of online shoppers visit an average of three sites before making a purchase.

BizRate.com expects the majority of this season’s online holiday gift buying to be in the book, video, clothing, and high tech gadget categories. Educational toys and games will continue to be popular along with video game sales.

“Three years ago, consumers were afraid to give out their credit cards,” said Davis. “Two years ago a lot of families were unpleasantly surprised by not having delivery in time for the holidays. Those problems are long under the bridge.”

The folks over at Yahoo! are banking on the success of a March 2002 ‘Biggest Sale in Internet History’ event to launch a pre-holiday shopping frenzy from October 6-9, which the Internet portal expects will hoist holiday sales margins considerably for all 1,200 merchants involved in the campaign.

Yahoo!’s March event turned out to be far more successful than originally expected, and in some cases retailers saw sales lifts of 400 percent.

“People are becoming more and more enamored with shopping online, the bargains and the convenience,” said P.K. VanDeloo, brand manager for Yahoo!. “They are seeing online shopping as a preferred means to shopping, and while we may see declines in the offline world, there are definite increases in the online world.”

Yahoo!’s ‘Biggest Fall Sale in Internet History,’ will promote discounted items from online retailers such as HPShopping.com, J Crew, and Eddie Bauer, including its own services like Yahoo! Travel, Yahoo! Personals, and the Yahoo! Store.

Yahoo! plans to follow-up its Fall shopping blitz with pre- and post-Christmas sales events to be announced at a later date.

To lure in cash-strapped shoppers, the portal will also offer a free shipping page for consumers who aren’t sure what they want to buy, but know it has to be cheap and shipped for free.

The only downturn to the otherwise healthy prognosis for the holidays, says Davis, is that this year’s holiday season stretch is shorter than in prior years because Thanksgiving falls on the last weekend of November, leaving only three and a half weeks for Christmas retailers both on and offline to ring in sales.

Davis says no one is yet sure how this will effect holiday shopping in general, although BizRate.com is predicting that the shortage of shopping days will ultimately benefit online retailers because consumers will be able to squeeze in extra shopping hours at night or at work.

“The optimists say that fewer days to shop at the mall leads to more online shopping,” said Davis. “The pessimists say there are fewer days and fewer days.”

BizRate.com’s study was based on a panel survey of online buyers between September 20 and September 26, 2002.

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