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The Honolulu Advertiser
Posted on: Monday, December 22, 2003

Crunch week tests growing reliance on Web orders

By Leslie Brooks Suzukamo
Knight Ridder News Service

Usually, nobody beats Santa Claus' famed night-before-Christmas deliveries. But John Michener did.

Last year, the 42-year-old Minneapolis engineer got up Christmas morning, shuffled in his rumpled sweats to his computer, and sent his parents in North Carolina an electronic gift card from L.L. Bean.

"Yeah, I kinda put it off a little bit," he admitted sheepishly.

Michener obviously pushed the deadline, but analysts who have been watching the evolution of Internet retailing say holiday shoppers are getting so accustomed to the convenience of shopping online that more of them are depending on electronic retailers to sweat the details and get their gifts delivered in time to be opened under the tree.

While some retailers are confident enough to offer online ordering even on Dec. 23 — and many offer electronic gift cards Christmas Day — a few analysts worry about the ghosts of Christmases past, when e-tailers botched the job and online retailing got a black eye.

So will this season be ho-ho-ho, or oh-no-no?

The growth of online shopping is undisputed, though calculations are uneven. Forrester Research, a Cambridge, Mass., technology research and consulting firm, predicts that online holiday sales will rise 42 percent, to $12.2 billion.

Rival Jupiter Research in New York City forecasts consumers will spend $16.8 billion during the holiday season, up 21 percent.

Malls can blame themselves for losing business, said Donna Hoffman, co-director of the Vanderbilt University Sloan Center for Internet Retailing.

"Online shoppers have grown accustomed to being able to compare features of similar products, whereas many mall clerks don't know any more about the products in their stores than you do," Hoffman said.

Jupiter analyst Patti Freeman Evans has noticed that consumers have been buying holiday gifts online later every year.

PriceGrabber.com, a comparison-shopping site, saw sales referrals climb the week before Christmas last year after a decline in 2001, she said. And more online shoppers — 42 percent — than overall holiday shoppers — 38 percent — plan to complete shopping during that last week, according to the American Express Retail Index on holiday shopping.

Retailers have responded, with 62 percent telling Jupiter they spent much of last year improving their infrastructure to accommodate last-week shoppers.

Target.com and MarshallFields .com, the online stores for Minneapolis-based Target Corp., have pushed back their order deadlines. The last day to order for two-day delivery is Dec. 21 instead of Dec. 19; the deadline for one-day delivery is Dec. 22 instead of Dec. 21, said spokeswoman Jennifer McNamara.

At BestBuy.com, the online version of Richfield, Minn.-based Best Buy, the last day to order online with expedited shipping is noon Central time Dec. 22. But you can order online until noon Dec. 23 and pick up in a store the next day, said Best Buy spokesman Jay Musolf.

In her survey, Freeman Evans found 24 percent of retailers would take online orders this year on Dec. 23, up from 18 percent last year.

If there's an Internet Grinch, it's that online retailers may not have done enough. Keynote Systems, a company that measures Web sites' performance, noted this week that major online shopping sites "continue to underperform" for the second week in a row, with inconsistent response times and success rates for completing transactions.

AMR Research, a technology research firm, noted that almost 20 percent of online customers last year had a bad experience with at least one site and would not return. Its report predicted that would grow to 25 percent to 30 percent by the end of this year, putting at risk $4 billion to $5 billion in online holiday spending.

The reasons are threefold, says Andy Macey, vice president of supply chain consulting at Sapient, a business consulting and technology services firm in Cambridge, Mass.

First, many retailers have outsourced parts of their operations, breaking the neat supply chain.

Second, the general backlash against technology spending of the past two years meant that some retailers are playing catch-up.

Finally, the popularity of online shopping is going to collide head-on with retailers' desire to keep inventories lean, and some may not realize they don't have enough goods until it's too late, he said.

"I personally would not be placing a Christmas order on the 23rd," Macey said, as it is all but impossible to know who can come through in the crunch.

Michener, meanwhile, went online this week to order more gifts — real stuff, not gift cards. He was a bit concerned, "but as long as I have express delivery for my packages, I should be OK," he said.