The most wonderful time of the Web year

Holiday sales cap a strong year for top on-line merchants

Far from the madding crowds, National Online Shopping Week kicked off the holiday shopping rush last week. Many retailing members of organizations such as the Association for Interactive Media and electronic commerce trade group shop.org offered discounts, free gift wrapping and reduced shipping rates to entice buyers out of the malls and onto the Internet.

A Louis Harris & Associates study for Dell Computer says that 43% of the 53 million American computer users say they will likely shop for gifts on the Internet this year, more than triple 1997's percentage. The Marketing Corporation of America expects 1998 holiday sales over the Internet to hit $5 billion. Jupiter Communications comes in with a lowball figure of $2.3 billion, up from $1.1 billion in 1997-but adds that gifts will constitute only 16% of those purchases.

Total spending for consumer goods this holiday season should reach $172 billion to $174 billion. Still, this is widely expected to be the year that Web shopping earns its stripes. In fact, the last six weeks of the year will cap an extraordinarily good one for e-commerce, according to a recent study jointly produced by shop.org and The Boston Consulting Group. That study foresees Internet retail revenues of $13 billion in 1998, up from about $7 billion in 1997.

The study incorporates sales data from 127 shop.org members and estimates for others with sales of more than $100,000 on the Web, said David Pecaut, senior vice president of Boston Consulting. "One of our big 'ahas' was that multichannel retailers, those who already sold through stores, call centers or catalogs, have done a lot better than most people expected," he said. "We tend to focus on the Amazon.coms, but these multichannel retailers make up nearly half of the total on-line retail revenues, and their closure rates are nearly twice those of the virtual-only retailers." Pecaut attributes the Web success of traditional merchants such as The Gap and Sears to brand recognition and a loyal customer base.

Many portal sites have revamped their e-commerce abilities for the holidays. Yahoo! Shopping helps consumers buy 2 million products from 2700 on-line stores. But Pecaut said retailers surveyed felt that the power of portals will wane with the rise of strong stand-alone brands. "Portals today are like a guy on a street corner-you're new in town and you ask him, 'Where's Toys R Us?' He'll tell you, but you're not going to go back and ask him a second time."

More effective are upstream links-hot links at a site that lead surfers to a retailer. "Amazon.com has hot links to over 100,000 upstream sites," Pecaut said. "Some of the biggest e-tailers employ people who do nothing all day but call sites and ask to be linked."

The most successful Web merchants combine the reach of the Internet with a rich inventory. Pecaut reported that a large CD Web site noticed that several customers over 65 were buying rap discs. "It was for the grandkids. So they began direct marketing those folks with a list of the top-selling rap artists, and they doubled their sales in that group."

The other lesson from the survey-one Pecaut said this Christmas should underline-is that time is running out for retailers not yet on-line. "They don't realize how much the learning curve affects the ability to succeed here," he said. "Barnes & Noble got in late and didn't execute well, and they've fallen further behind Amazon.com despite their assets."

Would-be Web sellers can't afford to wait. "And they can't take a cheap, toe-in-the-water approach either," Pecaut said. "That stage was three or four years ago. We're beyond that now. E-commerce is not for the faint-of-heart."

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