Blue Christmas - Industry Trend or Event

Industry Standard, The, Jan 1, 2001 by Miguel Helft, Jennifer Couzin, Keith Perine, Kevin Roderick

"[Online] retailers are not making people happy on pricing," says Lauren Cooks Levitan, the Robertson Stephens analyst who conducted the survey. To compensate, online stores will have to focus on convenience. "That means you might end up with a smaller target market because there are more price shoppers than convenience shoppers," she relates.

The most significant exception to all this bleakness seems to be Amazon.com, which continues to draw customers with its combination of selection, product reviews and reliability. Most analysts agree that Amazon is on track to meet, or even top, its $1 billion forecast for holiday sales. The company's Delight-O-Meter, which counts units sold since Nov. 2, surpassed 31 million last week, as the company continues to hold the top spot for shopping traffic. Its branded Toys "R" Us store alone is the second most-visited online shopping destination. "We certainly see significant growth in this business," says John Barbour, CEO of Toysrus.com, brushing aside any concerns of a slowdown.

Yet even some longtime Amazon bulls note there is reason to worry. Merrill Lynch analyst Henry Blodget says Amazon grew by nabbing market share from weaker rivals, such as eToys - not because of overall market growth. "What happens in six months to a year when there is no more market share to gain?" asks Blodget.

To a large extent, Net retailing is suffering from its unrealized promise. So far, the vast majority of online stores have done little more than put up catalogs on a screen, forgoing features like intelligent recommendations and personalization, according to Erik Brynjolfsson, a professor at MIT's Sloan School of Management who remains optimistic about the long-term prospects of e-commerce. For the short term, however, Brynjolfsson says he is less sanguine: "We are going to see a little accelerated Darwinism over the next few months."