Monday, December 11, 2000

Epoch Research Note on Online Holiday Shopping

Epoch Partners, Inc. today issued a Research Note on the results of a shopping experience comparison between four of the top e-tailing Web sites and the implications for their holiday sales.

The Research Note, issued by Adria Markus, Analyst, Consumer Internet with Epoch Partners, highlights Amazon's Christmas season momentum and includes a Web site comparison of Amazon.com, Bluelight.com, Target.com, and Walmart.com.

* With just a few weeks left until Christmas, we believe Amazon is well on its way to reaching (or, even beating) our estimated $970 million of revenue in the fourth quarter. Preliminary data on Amazon's units sold, reported growth in holiday traffic, as well as the results from our site comparison study, give us increased confidence.

* Unit sales levels already met those of the 1999 holiday season. The Amazon Delight-o-Meter reached over 20 million items sold yesterday, handily meeting last year's holiday unit sales level, with 16 full shopping days still left until Christmas.

* Amazon/U.S. Postal Service deal will facilitate sales to the last minute shopper. The recent announcement that Amazon and the U.S. Postal Service have teamed up to deliver gifts over the Christmas weekend (and even on Christmas Day), extends the critical holiday season by a few days and should help the company capture the lion's share of last-minute Web shopper dollars since no other high-profile site is offering this same option.

* Traffic data also bodes well. Amazon.com remained the number-one retail site in terms of traffic for both the week ending December 3rd and the Thanksgiving week (growing 53% and 41% respectively over last year in each of the two important holiday weeks), ahead of its competitors by a considerable margin.

* Still the Customer-Friendliest Retailer on the Web. Our comprehensive site comparison study reveals that the customer experience on Amazon is still worlds better than that of its biggest brick-and-mortar rivals on the Web today. While we believe these sites will ultimately be Amazon's greatest competitors, our analysis also serves to highlight the strategic value of the platform that Amazon has built.

* In the short-run, we believe the stock would be favorably impacted by a better-than-expected holiday season, although fundamental concerns about margin potential and the path to profitability still remain.

Hottest Online Markets for Holiday Shopping
When it comes to online holiday shopping, No. 31 is No. 1 in new findings issued by BIGresearch.

The study shows that all online markets are not created equal when it comes to online purchase intentions for this holiday shopping season. To prove this point San Jose, the No. 31 MSA market by population, ranks No. 1 when it comes to hot markets for targeting shoppers who plan on buying online this holiday season.

The study was conducted from November 8th - November 14th.

The findings confirm Prosper's warning to e-tailers last year that they should better target their marketing to maximize the impact of their advertising expenditures.

"The online market appears more of a patchwork quilt with specific markets showing certain characteristics and intentions that make them more profitable for e-tailers due to the higher concentration of prospects. With the high number of online shoppers who are not predisposed to shopping at a specific site, knowing which markets to target could help to lower acquisition costs", said Dr. Joe Pilotta, VP of Research for BIGresearch. "For Brick and Mortar retailers who are establishing a web presence this information could also be helpful in determining target marketing strategies toward key cities"

The top 20 markets for planned online holiday shopping are (MSA Population Rank in parentheses):

1. San Jose, CA (31)
2. Riverside-San Bernardino, CA (10)
3. San Francisco, CA (29)
4. Seattle, WA (20)
5. Oakland, CA (21)
6. Boston, MA (9)
7. Washington, DC-MD-VA (5)
8. Baltimore, MD (18)
9. Hartford, CT (47)
10. Dallas, TX (11)
11. Portland, OR (27)
12. Salt Lake City-Ogden, UT (44)
13. Orlando, FL (40)
14. New York, NY (2)
15. Denver, CO (26)
16. Sacramento, CA (36)
17. Fort Worth-Arlington, TX (33)
18. Nassau-Suffolk, NY (14)
19. Anaheim-Santa Ana, CA (15)
20. Las Vegas, NV (45)

Each of the markets was ranked according to BIGresearch's proprietary index that analyzes market population, Internet penetration, online users and people planning shopping online for holiday gifts.

News Tidbits (appears every day on front page)
- Register.com has won an injunction against Verio to temporarily prevent Verio from accessing register.com's Whois database to target register.com customers with unsolicited commercial email, direct mail and telemarketing activity. In addition, Verio is preliminarily enjoined from engaging in conduct that misleads register.com's customers into believing that register.com is affiliated with Verio or its services.

- The Playstation2 crave is causing a lot of trouble online for both sites that sell the system and online consumers. Sites selling the system are receiving thousands of hits by Internet bots designed to do a price check and availability check for systems from major online retailers. The second major problem is fraud, where temporary online stores are being set up to sell "Playstation2" systems when, in fact, the site is just a front for a fraud ring that takes the consumer's money and leaves.