Sunday, December 24, 2000

Weekly Online Shopping Tops $1.5 Billion

U.S. home Internet users spent an estimated $1.5 billion during the week ending December 10, 2000, up from $1.3 billion in the prior week, according to the latest Goldman Sachs / PC Data study.

The weekly spending figure brings total online Holiday spending to $7.2 billion (since the week ending Nov. 5). This is 115 percent higher than the $3.3 billion that consumers spent online during the same period last year.

While season spending is more than twice the levels seen in 1999, year-to-year growth of spending during the second week of December was modest. The $1.5 billion in weekly spending was only 24 percent higher than the comparable week in 1999, during which consumer spending peaked at an estimated $1.25 billion.

“Online spending patterns are very different this year,” said Cameron Meierhoefer, Internet analyst for PC Data. “In 1999, the majority of Holiday spending occurred in the first part of December. This year spending started in early November and has continued. Online spending has topped the $1 billion for five consecutive weeks. That only happened once last year at its peak.”
“ Online sales for the week ending December 12th for the first time decelerated at a sharper rate than expected. While November-to-date sales were up 115 percent year-over-year, this is down from a November-to-date year-over-year increase of 170 percent in the prior week,” said Anthony Noto, Goldman Sachs Internet analyst. “While we had seen very strong year-over-year increases in online sales earlier in November (up by 250 to 300 percent), we have seen a much greater deceleration that we expected. We now think online industry Holiday sales will be at the lower end of our forecast gain of 50 to 100 percent year-over-year.”

Apparel continued to lead all online spending categories with over $213 million in sales during the week, up from $182 million the previous week. Online electronics sales were also strong, with spending rising over $200 from $122 million the previous week. Spending on computer hardware and toys was not far behind at $200 million and $138 million respectively.
Meanwhile, throughout the Holiday season, satisfaction among online consumers has remained high. From Nov. 19 to Dec. 3, respondents who said their online experience was the same or better than last year rose from 64 percent to 78 percent respectively. This week 75.4 percent of respondents said their online shopping experience was better or the same as last year.

At the same time, one in two respondents (52 percent) said items they wanted were out of stock, while one in four respondents (25 percent) noted a site failure prevented them completing a purchase.

Finally, one in four respondents (27 percent) said they had concluded their Holiday shopping in comparison to 19 percent who have yet to start. The clear majority of respondents (54 percent) indicated they have started but not concluded Holiday shopping.

Web Influences Purchases Made in Stores
Online purchasing and browsing are directly influencing consumer spending in traditional stores, according to a new Andersen Consulting study. Internet users in the US estimate that they will spend just over $300 online and an additional $300 in bricks-and-mortar stores as a result of online shopping.

“This holiday season, a Web site ceases to be a nice addition or an experimental marketing channel for leading retailers,” said Angela Selden, Andersen Consulting Retail practice managing partner, North America. “Instead, as eTailers claim a significant share of the consumer wallet for gift purchases, it has become an imperative.”

The battle for consumers’ holiday dollars will be fueled by record numbers of shoppers who indicated they will be purchasing gifts online this holiday season. According to the research:

Fifty percent of Internet users in the U.S. say they plan to purchase at least one holiday gift online, compared with 36 percent who reported having done so in 1999
The percentage of Internet users who say they will not purchase holiday gifts online this year plummeted by almost two-thirds – from 33 percent in 1999 to 13 percent
Nine out of 10 holiday shoppers (88 percent) will spend as much or more online for the holidays this year as they did in 1999 and approximately four in 10 (39 percent) survey respondents predict an increase in the amount of their online purchases over the 1999 holiday shopping season
Eleven percent of respondents say they will buy more than half of all their gifts online
Consumers indicate a willingness to make purchases beyond small ticket items. One-fifth (19 percent) plan to purchase an individual gift priced at $200 or more on the Internet, and six percent will make an online individual gift purchase of $500 or more

“We’re no longer looking at a slow-growing trend,” said Selden. “For the first time, retailers who haven’t created a compelling Web destination may be blindsided by stiff competition from the Internet this holiday season. Next year, the damage could be devastating. We believe that, for retailers, the die is now cast. To be successful, you must be a winner both off- and on-line.”

These findings support those of a recent Andersen Consulting Supply Chain study, which found that the frequency of failed attempted purchases over the Internet has dropped to one-third of the 1999 rate. Additionally, the study showed that last year’s service level gaps between eTailers, traditional Retailers and Catalogers are either closing rapidly or have closed completely.

Trusted Names, Compelling Sites Win
The research also finds that holiday shoppers are not frightened away by the high profile demise of several consumer-focused dot-coms (56 percent expressed no concern at all). Indeed, consumers said that past success with Internet holiday shopping and faith that this season holds the same promise is keeping them online. Asked about their online shopping during the 1999 holiday season, the vast majority (87 percent) say they were very or somewhat satisfied with that experience, and only three percent of respondents cite poor experience as a reason not to shop online this year. But almost one-half (47 percent) say they will only shop on Web sites they can trust.

The six retail Web sites shoppers said they anticipate using most frequently are a mix of traditional retailers with online offerings and Internet-only sites: Amazon.com, eBay.com, Barnes & Noble.com, ToysRUs.com, Yahoo! and J.C.Penney.com.

For the first time this year, online holiday shoppers expect to purchase more toys than books. According to the survey, the top five categories in which respondents plan to make purchases online this season include:

Toys (31 percent)
Books (29 percent)
Clothing/apparel (24 percent)
Music (25 percent)
Electronics (17 percent)

While more than half of the respondents (55 percent) already have gift ideas in mind and will use the Internet to find exactly what they want, many will go to the Web seeking ideas. In fact, 65 percent report that they most often find the retail Web sites they use through search engines, and 38 percent say they do so by randomly surfing the Internet.

“Web sites that are not compelling have now met the ghost of Christmas past,” commented Jeff Luker, Andersen Consulting retail practice managing partner, North America. “For traditional retailers, this provides an additional opportunity and threat: the means to shape consumers’ shopping lists – but only through capturing their interest and attention. This will require understanding their shifting needs and values. For example, our research indicates that banner ads, which were highly effective last year in attracting first-time shoppers to a site, have dwindled in effectiveness. In fact, only 22 percent of survey respondents cite banner ads as an influence in their use of the Internet for shopping this holiday season, but that is the same percentage who cite word of mouth as an influence. Thirteen percent of respondents mention TV and billboards, and six percent cite news reports. A retailer whose site fails to understand such trends and respond with innovation will find that the holiday season simply will not meet expectations.”

Benefits Abound
According to the research, barriers to Internet use appear to be falling. When respondents were asked why they would not shop online last season, they said that Web sites require too much information for purchases. That reason is far down this year’s list, following the general concerns of privacy and security – an indication that shoppers have become more familiar and comfortable with the process.

In large part, it is the ease of holiday shopping online that drives consumers to the Internet. Top reasons cited for shopping and/or purchasing gifts online include:

Convenience and ease (73 percent)
Avoiding crowds (69 percent)
Saving time (63 percent)

Top reasons cited for not shopping and/or purchasing gifts online include:

Like to touch/feel products (34 percent)
Don’t want to pay for delivery (31 percent)
Enjoy regular shopping (30 percent)

While price is not a top-tier factor, once online, respondents consider it key in selecting an online retailer (41 percent of respondents cited finding lower prices over the Internet as a reason for shopping online) and as a basis for comparison shopping (63 percent said they would use the Internet to compare gift prices).

The Advent of Wireless
In what is perhaps another opportunity for retailers, wireless device usage for holiday gift purchase is making its debut this year. According to the survey, only two percent of respondents used a wireless device, such as a cell phone or Personal Digital Assistant, to shop for and/or purchase gifts in 1999. That number increased to six percent this year, and one quarter (nearly 27 percent) volunteer that, if wireless devices offered the accessibility and product selection of the Internet, they would consider using them to make eCommerce purchases. Another 47 percent are not sure whether that would boost their receptivity to mobile purchasing.

“This is the next battle for leading-edge retailers to differentiate their business and capture the customer,” commented Luker. “We believe that, as consumers become increasingly comfortable with mCommerce, the numbers of shoppers using wireless devices will expand dramatically. mCommerce holiday shopping will be a greater factor next year, and retailers need to begin planning now for that shift.”

Methodology
The survey, fielded by Andersen Consulting in November 2000, was conducted among 1,967 U.S. residents 18 years of age or older who have shopped for products and/or services over the Internet. The survey was conducted entirely online.

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