Home-Shopping Channel

Brandweek, Nov 1, 1999 by Becky Ebenkamp

Holiday 1998 was heralded as the point in time when the Web became a serious contender as a shopping channel, an idea supported by sales of $3.1 billion, according to one research firm.

Overall, holiday sales increases will be in the 6% to 6.5% range this year, according to the National Retail Federation's Holiday Mood Survey, and while predictions about how much we'll spend online vary greatly there's one thing forecasters can agree on: Consumers will be buying a significant portion of their fruitcakes via modem.

Despite issues with invisible salespeople, secure transactions, the inability to touch or try on products, and the burden of imputing screen after screen of personal information to set up an account with an online merchant, the number of online shopping households will reach 27 million by year-end, projects NFO Interactive, and 3 million shoppers will join the ranks this holiday season.

What turns a Web window shopper into an actual spender? Greenwich, Conn.-based NFO says the best lures for converting browsers to buyers are price discounts (80%), promises of privacy (66.7%), the ability to return a product to a physical store (24.6%) and real-time customer support (11.6%).

According to The NPD Group, 68% of Internet users plan to check off at least a portion of the items on their gift lists with modem in hand, a figure that's nearly double NPD's estimate of how many purchased presents on the Web last year (36%). The Port Washington, N.Y., firm expects to see jumps in apparel (24% said they will purchase clothing on the Internet this year vs. 15% who said they had last holiday season), toys (23% vs. 11%), video-games (14% vs. 6%) and beauty supplies (11% vs. 5%).

How does that translate to actual sales numbers? NPD doesn't say but analysts from Jupiter Communications do, albeit in broader terms: The New York-based research company is forecasting online sales of $6 billion this November-December, nearly doubling last year's $3.1 billion spent.

And that's only half of what the soothsayers at Expert-source are predicting. Holiday spending will be closer to $12 million, says the panel of experts gathered by Business Wire and The Round Table Group, but that shouldn't cause brick and mortar retailers to feel much of a sting, as most Internet shoppers will still buy most of their presents offline: Only 5% will do more than 75% of their gift shopping on the Web, and more than half (64%) will spend less than 25% of their dollars online.

And even if they were buying the bulk of their gifts with the click of a mouse, traditional retailers wouldn't have all that much to fret about, says a story in The Economist: The most successful e-tail sites are extensions of existing stores and catalogs, whose brand name status, marketing clout and cross-marketing ability gives them the advantage over pure Web businesses. These destinations account for 62% of all e-commerce, a figure expected to grow to 85% in five years.

Jupiter gauges that 10 million consumers have made--or will make--their first Web transactions in 1999, and many of those will have their first brush with e-commerce while making gift purchases this holiday season. While that number sounds encouraging for transaction sites, those not prepared for the surge in traffic could turn their first-time customers into last-time customers as well.

In a Jupiter survey conducted shortly after the 1998 holiday season, Web shoppers' levels of satisfaction had dropped 14 percentage points--from 88% to 74%--from the previous spring, mainly because sites weren't equipped to handle heavy holiday traffic. The stress begat site failures, lousy customer service and poor fulfillment in the season when orders absolutely have to be there overnight or, at least, when delivery is promised.