Holiday shopping report: with summer barely over, e-tailers already eyeing Christmas trends

DSN Retailing Today, August 22, 2005 by Mike Duff

NEW YORK -- Santa may still be in the midst of his summer vacation, but the first indications of what the holiday selling season will be like are arriving. Because online retailers are experiencing an earlier selling season and researchers are refining their models of what late summer indicators may mean as consumers move off the beach, back-to-school and finally on to gift giving, trends that are gaining momentum are gaining visibility.

Research firm eMarketer predicts that online retail sales will reach $26.2 billion for this holiday season, up nearly 22% from last year. More than a quarter of the merchants responding to a study conducted by LaGarde, a software and e-commerce service provider, believe that holiday shopping on their sites starts in August or September, and 60% of the 100 storefront e-commerce operators surveyed say their holiday selling season predates Nov. 1.

Early or not, the Internet retailers LaGarde surveyed are looking forward to the holidays. Sarah Fender, vp of product marketing, said that 75% of storefront e-tailers surveyed expect significantly increased results this holiday season versus 64% of respondents last year.

The optimism Internet operators feel, said Bob LaGarde, the company's ceo, is reflected not only in what consumers say but in how they are purchasing. "We can tell by the dollars they are spending that they are feeling more confident," he said.

Promotions will be critical to the success of the holiday season, and how they are approached will determine who makes money.

Free shipping again will be prevalent among e-tail promotions this year, according to WebTrends. About 63% of the 242 retailers surveyed early this summer said they plan to waive shipping charges for online orders. Still, 42% intend to use value-added promotions to generate online revenue from loyal customers while 33% plan repeat-buyer discounts tied with online-only sales.

More consumers are shopping mass merchants for commodities but they also are patronizing small, high-end retailers for their splurge items. Early on, LaGarde noted, sales in the Internet space indicate that higher-end luxury goods continue to constitute a relatively high proportion of sales.

Pat Conroy, vice chairman and national managing principal of Deloitte's Consumer Business practice, noted that retailers must have a plan to get that high-end purchase during this holiday season.

"One thing in particular I'm going to look for is what retailers will do in terms of wrapping services around product offerings," he said. "We see and believe that promotions can get you into the store but the consumer intimacy aspect is going to convert the sale. Otherwise retailers will have a bunch of window shoppers."

Personalization will take many forms, whether it's color options in laptop computers or gift basket deals in which consumers choose items throughout the store. "Once the initial luster wears off, companies have to extend the product," Conroy said. "They have to stimulate demand by marketing. The phenomenon highlights the fickle behavior of consumers."

Gift cards should be a bigger factor than ever this season as they are often viewed as more personal than money. Retailers are looking for ways to promote gift cards because consumers who shop with them tend to spend more than the value of the card and don't concentrate as readily on discounted items, noted Conroy.

Some macroeconomic trends like broader increases in discretionary income, better-than-expected employment numbers and continued conversion of low-rate mortgages into cash favor a strong holiday, but factors that can hurt retailers include online fraud. Gas prices are a concern, although they are a lesser threat to the luxury purchase, and Conroy identified spending on heavily discounted new cars as a blip that probably will have a mild affect on holiday spending.

All warnings considered, however, the initial indications are for a strong holiday season.