Wednesday, January 24, 2001

Online Holiday Shopping 2000: A Tale of Two Christmases

While 51 million U.S. consumers purchased a gift online during the 2000 holiday season and average spend increased 62 percent over the year before, another 16 million shoppers attempted to purchase online, but failed. According to new research released today by The Boston Consulting Group and Harris Interactive, the 2000 online holiday shopping season was characterized by greater spending, higher levels of satisfaction, but also considerable latent demand and continuing purchasing problems.

"Two stories have emerged this holiday season. On one hand, we’ve seen very positive results — there was a greater number of shoppers, who spent more and who were increasingly satisfied with the experience," said Lori Iventosch-James, Director of e-Commerce Research for Harris Interactive. "Yet, online retailers failed to capture the more than 16 million consumers who attempted to buy a holiday gift online, but couldn’t complete the purchase. These consumers represented $1.5 billion in potential sales — and a missed opportunity few retailers can afford."

By the end of the 2000 holiday shopping season, the number of consumers who had purchased a gift online increased 28 percent from the 1999 holiday season. Almost half of these consumers, 23 million, were buying holiday gifts online for the very first time. On average, online holiday shoppers spent $276 online — 43 percent more than they had anticipated on spending going into the holiday season, and 62 percent more than the average online holiday shopper spent in 1999.

Satisfaction with the online shopping experience this last holiday season also increased, despite continuing frustrations with the purchasing process. Eighty-two percent of online purchasers indicated that they were satisfied with the experience, up from 76 percent the year before. Yet, roughly half of purchasers experienced a purchasing problem of some kind in 2000, a similar proportion of purchasers who had experienced problems in 1999.

"Our survey shows that in the 2000 holiday shopping season, site navigability and ease-of-use was less of a concern for consumers," said Michael Silverstein, BCG Senior Vice President and Leader of the firm’s Consumer Practice. "Back-end operations, however, continue to pose a significant challenge for online retailers. Most consumers who experienced a purchasing problem expressed a continuing frustration with finding out that the product they ordered was out-of-stock and approximately five percent of gifts ordered did not arrive in time for Christmas. That’s a very high number and not excusable. The lost order has become the difference between the winning online vendors and the losers."

Online consumers have also become more selective in where they buy their holiday gifts. They shopped in fewer categories and on fewer sites during the 2000 holiday season than they did in 1999. Most holiday shoppers in 2000 shopped in only two different product categories, compared to three categories the year before.

"This holiday season, we’ve seen a real flight to quality as consumers have concentrated their online spending to a smaller number of retail sites," said Peter Stanger, BCG Vice President and Topic Leader for Business-to-Consumer E-Commerce. "Consumers are increasingly loyal to brick-and-mortar sites and the few pure-plays with extremely strong brands. This trend should last well into 2001 and beyond."

Looking forward to the 2001 online retail year, the survey found that online demand will continue to be strong. Already, 18 percent of online holiday shoppers have also taken advantage of many of the post-holiday online promotions, spending an average $128 each on sale items in the weeks following Christmas. Thirty-nine percent of the online population also intend to purchase more online in 2001 than they did last year.

These findings were obtained from an online survey conducted by The Boston Consulting Group and Harris Interactive from January 3 to 9. This quantitative survey was completed by 2,107 Internet users over the age of 18 who live in the U.S., selected from Harris Interactive’s panel of more than seven million respondents.

Europe's eSecurity Services Tops $1.5 Billion in 2000
eSecurity services are a hot topic, and for the first time ever, IDC has sized this rapidly growing market segment in Europe. IDC predicts the esecurity services market will exceed $4 billion dollars in Western Europe by 2004 - making it one of the fastest-growing segments in the European IT services space.

"The race to properly secure Europe's ebusiness networks will be a marathon rather than a sprint," said Sandra Baccari Edler, research analyst for IDC's European eInfrastructure Management Services program. "Security players that understand the forces shaping the security services market in Europe and respond accordingly will gain the most - in both market share and profits."

Current market leaders - primarily security software and product suppliers with diversified offerings - tend to be those that existed before the avalanche of media hype surrounding esecurity, which began more than a year ago. IDC expects many of these companies to retain their leadership position after the buzz has abated. However, in addition to these traditional players, a variety of new players with differing go-to-market strategies has emerged. Undoubtedly, some of these players will go on to take their place in the struggle to secure the ebusiness environment.

IDC defines information security services as the activities involved in the planning, design, implementation, and management of highly secure networks. As such, security consulting, integration, and implementation, as well as ongoing monitoring and management services, comprise the bulk of services available in this market sector. Security training and education, while still a relatively small proportion of the overall market in Europe, is also included in this space.

News Tidbits (appears every day on the front page)
- Online companies are learning the hard way that firing employees without following certain procedures can lead to trouble. According to eCompany Now, "If you're not careful, the law will kick you when you're down. Just ask Priceline.com's founder Jay Walker. Priceline's stock continues to hover in the low single digits, and this month his other company, Walker Digital, the research lab that owns the Priceline business-method patent, was slapped with a lawsuit by the state of Connecticut for allegedly violating federal labor laws..."

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