The Prognostication Game

Gomez Advisors Inc., the latest research firm to enter the online holiday
sales guessing/predicting game, came in with an estimate of $11.4 billion,
about double what was spent last year.

Earlier
predictions included something in the vicinity of $10 billion by both
Forrester Research and Pricewaterhousecoopers, and a
prediction of $19.5 billion worldwide by Gartner Group Inc.

Gomez said its research indicates that the anticipated growth during this
holiday season will be driven by a number of key factors, such as the
continuing expansion of Internet access; an increasing number of consumers
turning to the Net as a valuable shopping channel; and the rise of
cross-channel marketing, especially with heightened online activity among
traditional brick and mortar retailers and even branded manufacturers.

“This year is clearly the year of the multi-channel retailer as many
existing, branded players realize that they can leverage their physical and
catalog operations with an online offering,” said Jill Frankle, director of
retail e-commerce for Gomez.

“Consequently, increased pressure is being put on the smaller players who
have not yet built a strong company brand,” she said. “Many pure dot com
players, especially those with highly seasonal offerings, are facing critical
periods as this quarter will account for a significant portion of their
annual revenues.”

Gomez said its research indicates that there has been increased investment in
inventory planning, inventory management and merchandising.

A preliminary analysis of Gomez’s soon-to-be-released holiday survey
indicates that 81 percent of retailer respondents plan to have real-time
inventory management during the upcoming holiday season. Some online
retailers have taken significant steps to ensure a positive shopping
experience for their customers, including service level guarantees from
shippers. Others are posting the dates after which orders cannot be
guaranteed to arrive in time for the holiday.

“This holiday season differs from the 1999 online holiday season in that we
are recognizing a dramatically reduced level in marketing spending directed
toward customer acquisition,” Frankle said. “Instead, greater emphasis has
been put on servicing existing customers, providing a superior online
experience and safeguarding against many of the problems, such as fulfillment
issues, that plagued retailers in the 1999 holiday season.”