Online retailers beating stores for holiday growth
By Leslie Walker
Washington Post
Internet cheapskates are out in force this holiday season. They may be spending less on each order than they did last year, but together they're coughing up more dough and using the Internet to stretch their dollars, according to research released this week.
Online sales totaled $8.3 billion in the last five weeks, up 43 percent from 2001, market researcher BizRate.com reported. The data suggest that Internet retailers will be ringing out the year with relief, if not good cheer. Like offline stores, Web merchants rely on the last quarter of the year for much of their income.
"This means Internet retail sales have nearly doubled over the past two years, at a time when offline retailing has been almost flat," said Chuck Davis, chief executive of BizRate.
BizRate electronically monitored thousands of sales from Nov. 1 to Dec. 9 and found that more people are placing more orders this year, as the total number of electronic purchases shot up by 49 percent. But the average Internet order was $139, down from $145 last year, BizRate found. Some 74 percent of shoppers surveyed said they were on a tighter holiday budget this year.
BizRate has a point-of-sale monitoring system that allows it to electronically survey shoppers at the moment they've bought something online from one of several thousand participating merchants. Separately, it maintains a database of about 600,000 Internet shoppers, whom it surveys from time to time.
Free shipping is the big lure — even more so than last year. Some 41 percent of Internet purchasers told BizRate their orders had been influenced by merchants waiving delivery fees, up from 33 percent last year. BizRate's comparison-shopping site listed 152 merchants with free shipping Wednesday, up 26 percent from last year.
"Retailers in a tight economy are bumping into each other trying to win the consumer's business," Davis said. "So it's not just 'My free shipping is better than yours,' but 'Mine is faster, too.' "
No particular category is seeing dramatic increases, but digital cameras top the list of query terms at Yahoo Shopping and many other comparison-shopping sites. RitzCamera.com said its holiday sales were growing in the "high double digits" for a second year in a row.
Other top 10 searches on Yahoo Shopping in recent weeks included PlayStation 2, GPS (Global Positioning System gear) and Gucci. A more surprising hit gift, judging by popular online searches, is Beyblades, an inexpensive game that involves battling spinning tops.
All in all, Internet retailers seem to be headed for a modestly successful holiday. Reston, Va.-based ComScore Networks, another researcher, projects fourth-quarter Internet sales excluding travel will jump at least 30 percent from last year, from $11.8 billion to as much as $15 billion. Retail analysts, meanwhile, estimate that offline sales will grow by a measly 2 to 4 percent.
"What we are seeing is a sales channel shift," said Michelle David Adams, a ComScore vice president. "People are taking dollars they spent offline last year and spending them online."
Bear in mind that most big offline retailers eke out profits, while a majority of Internet-only retailers don't. And despite the heady growth rate for Web merchants, online sales represent a fraction of overall retail sales, less than 2 percent.
But if it can keep up annual sales growth of 20 to 35 percent for a few more years, Internet retailing appears destined to become profitable for at least some survivors.
Since Internet shoppers tend to be price conscious, it's no surprise that merchants doing well include Web liquidator Overstock.com, which reported $7.2 million in sales for last week — more than three times its sales for the same week a year ago.
Another is auctioneer eBay, which is trying to remake itself into a place people think of when they're looking for new toys and digital cameras, not just used Barbies or antique silver. EBay pulled ahead of Amazon.com last week as the Internet's top shopping destination, drawing 11.9 million visitors, compared with Amazon's 10.2 million, according to Web audience measurement firm Nielsen/NetRatings.
Among the trends helping to boost orders is an increase in gift-certificate sales. Online gift-card purchases declined earlier this year, but have jumped 14 percent during the fourth quarter so far compared with the fourth quarter of 2001, ComScore reported. Last week's online gift-card sales doubled compared with the same week last December.
One beneficiary is TicketCity.com, a Texas-based ticket broker that has been selling about 25 gift certificates a day, many for college football games, compared with three a day during the holidays last year. Overall, the site reports that it is selling $15,000 in tickets a day, up 200 percent from last year.
More Internet users are shopping online, ComScore says, which is largely a function of newbies taking the plunge to trust the network with their credit card information. That has lowered the average order size, since new Internet users tend to spend less, but ComScore says the amount they spend online will rise as they grow more comfortable with the technology.
Online retailing peaks sooner than offline holiday spending because of the time required for shipping, and many free shipping deals guarantee Christmas delivery only for orders placed by the end of this week. Millions of folks, however, are likely to pay for expedited shipping next week.
