Do You Believe In Magic?

Worse yet, if Internet retailing generally fell flat during the holiday season, the Web market likely would face even harsher consequences from Wall Street. Without stellar sales growth, investment firm analysts would lack the evidence that the Internet stores really are stealing market share from their brick-and-mortar cousins. "People are going to think there's not Internet magic after all," Piper Jaffray's Franco said.

For entrepreneurs like Kugelman, though, now is not the time to think about Wall Street hocus-pocus. Rather, the emphasis for the next three months should be on making moves that help the company lock up a piece of the market for beauty products online that is expected to top $500 million this year and reach $6.3 billion by 2003, according to projections by Forrester Research.

It's a potentially lucrative niche that is likely to attract other companies to the market in the coming year. That fact alone makes the fourth quarter an especially critical time for carving out market share, Kugelman said.

"In this category, the competition is heating up," she said. "It's important to establish a footprint on the Web."