Online sales exception to soft holiday trend - online sales grow during Christmas season

DSN Retailing Today, Jan 6, 2003 by Mike Troy

NATIONWIDE DSNRT REPORT -- Amid talk of a challenging retail environment and reports of disappointing holiday sales, one bright spot that went largely unnoticed during this past season was the resurgence of online sales growth. Based on sales trends through Dec. 13, online sales at non-travel Web sites were on track to grow 30% to approximately $14 billion during the calendar fourth quarter when compared to sales of $10.8 billion during the prior year's fourth quarter, according to comScore Networks, a provider of online sales information.

That level of growth is comparable to the 28% to 30% gains achieved during the first, second and third quarters of the year, which puts online sales at non-travel Web sites on track for annual sales of approximately $43.5 billion, a 29% increase over 2001 sales of $33.7 billion.

Part of the reason holiday season sales reaccelerated in 2002 relates back to fulfillment issues during the 2000 holiday season that soured customers on online shopping when their gifts didn't arrive in time for Christmas.

"Keep in mind in 2000 a lot of people had poor experiences shopping online," said Michelle David Adams, vp of retail solutions with comScore Networks, a provider of online sales information.

Fulfillment has since been improved and customers who bought online during the '01 holiday season returned in 2002.

"What has happened is people have experienced the convenience of shopping online and gained confidence in it," said Adams, attributing the growth to the fact that, "more people are trying (online shopping) and more people who made purchases online and had a favorable experience with it are channeling more of their dollars online."

Adams should know. ComScore Networks is considered the leading provider of information about consumers' online shopping behavior and its numbers are about as close to actual point-of-sale data as is possible to obtain.

"We make our observations based on the actual behavior of 1.5 million consumers who visit 50,000 e-commerce sites so there isn't a lot of room for subjectivity," Adams said.

Online sales growth last year and during the holidays also had a lot to do with retailers helping their own cause. Web sites have improved, retailers are more realistic with the guarantees they make about when merchandise needs to be ordered to arrive by Christmas and there continues to be closer integration of the online shopping experience with physical stores.

In that regard, one of the best examples this holiday season was in the consumer electronics area, where retailers such as Best Buy and Circuit City offered in-store pick-up of items ordered online. Circuit City was particularly aggressive and promoted the capability in TV ads. Circuit City also highlighted on its Web site that orders placed online before 3 p.m. on Christmas Eve could be picked up at stores before they closed at 6 p.m.

Those last-minute online shoppers who wanted merchandise delivered had that option with most conventional retailers until Dec. 21 if they wanted to guarantee arrival by Christmas Eve, or until Dec. 22 in the case of Amazon.com.

Although it is too early to forecast whether the rate of online sales growth this year will accelerate further from 2002 levels sales are certain to increase, according to Adams.

FASTEST GROWING NON-TRAVEL E-COMMERCE CATEGORIES

                         SALES:    % CHANGE
                        11/1/02      VS.
CATEGORY                11/13/02  PRIOR YEAR

HOME & GARDEN            $458         79%
JEWELRY & WATCHES         173         73
FURNITURE & APPLIANCES    146         71
TOYS                      348         69
SPORT & FITNESS           199         66
MOVIES & VIDEO            178         49
APPAREL & ACCESSORIES   1,293         39
VIDEO GAMES               111         28
FLOWERS & GIFTS           166         28
CONSUMER ELECTRONICS      824         19

Source: comScore Networks