E-tailers brace for holiday madness

Delivery issues, product availability, season marketing, etc.; 62 online merchants surveyed by Gomez's annual holiday season survey show how they are getting ready for this year's year end retail bash.

As if e-tailers needed to be reminded of what's at stake this holiday season, the media has collectively pronounced Christmas 2000 a "make or break season" for online merchants. You can't go a week without seeing some scrooge predicting death to those who come up short this December.

Whether or not the situation is that dire, there's no question the season will be no party for those who fail. But with some $11.4 billion in online sales up for grabs (double the amount in last season's stocking) companies that do well will certainly have something to toast New Year's Eve.

Who will pop the cork remains to be seen. But the 62 online merchants who participated in Gomez's annual holiday season survey are doing everything in their power to make it to the celebration. They're polishing up their Web sites, launching e-mail campaigns, and devising innovative ways to acquire customers -- without breaking their banks.

Take Outpost.com. The consumer electronics site has retooled itself as a one-stop gift shop that sells high-end merchandise ranging from cigars to watches to steaks. Others are partnering with big offline brands -- such as 800.com's campaign with Amstel and Heineken and SmarterKids brochures in Shaws and Star Market supermarkets.

What they aren't doing is throwing money at expensive television and radio ad campaigns, making overreaching promises, or offering free shipping as standard fare. Of course, for some, December is just like any other month. Says Alan Rimm-Kaufman, marketing vice president at consumer electronics e-tailer Crutchfield.com: "If I was doing more [to prepare for the holidays], my boss would ask why are you doing less the other 365 days of the year?"

Tons Of Effort, Few Guarantees

Daily duty or not, the merchants we surveyed seem to have learned their lesson last year. Roughly 86% said they plan to post the last date they will accept orders. More than half (54%) will recommend that customers place orders only until December 17 or earlier (message to consumers: shop early!).

A brave few are going out on a limb, however. Around 15% said they recommended placing orders before December 20. And Outpost.com will take orders up until December 22. Says Donna Keane, design research manager, the company is even working with a couple of carriers to deliver on Christmas Eve -- a Sunday.

After last year's high-profile fiascos, which supposedly resulted in thousands of disappointed children without presents under the tree, 77.4% of the companies surveyed said they plan to address online delivery. Still, perhaps under the threat of FTC penalties, few are willing to back-up their promise with a pledge. Only 32% said they will guarantee delivery. The majority see things the way Crutchfield's Rimm-Kauman does: "We can guarantee that [a product] will get out of the building," he says, "but I don't see how anyone can guarantee [that it will reach its destination on time] unless they drove it to the house themselves."

Acknowledging this problem, 800.com intends to call customers if it looks like their orders won't make it on time. "We've got our own dedicated call center up 18 hours a day, staffed by trained 800.com employees," explains Tim Zuckert, a vice president and chief marketing officer. "We'll use those folks to proactively contact people so they aren't disappointed."

A whopping 89% of the merchants surveyed said they plan to address product availability, yet a scant 23% will guarantee that the products advertised on their sites will be available. This is surprising, given the ability of so many e-tailers to monitor their inventory and let customers know if a product is out of stock in near real-time.

While 89% of the merchants surveyed said they plan to address customer service in preparation for the holiday shopping season. Roughly 58% are handling all telephone customer service themselves. And about 86% plan to hire additional customer service reps to support their online operations.

Goodbye Flying Gerbils, Hello E-mail

Unlike last year's race to grab eyeballs, this year, e-tailers are being pressed to show profits. This will show up in several ways. For one, many are trading in expensive TV and radio advertising in favor of less glitzy alternatives. This year, you won't see anyone shooting gerbils through the middle "O" in Outpost.com, for example, or unleashing wolves on a high-school band. Instead, the company is using the bulk of its marketing budget to offer free overnight delivery throughout the year and doing most of its advertising via the Web.

Outpost isn't alone. A mere 24% of polled e-tailers said they expect to get out their message via television ads, and just 16% said they will use radio to spread the word. By comparison, 69% plan to launch lower cost but more targeted e-mail campaigns, 44% will send direct mail, and 53% plan to advertise in print.

More than 32% of the companies surveyed will join Outpost in attempting to attract customers by offering free shipping. But many are doing so as a special promotion to select customers or for a limited time only. SmarterKids, for example, will reward loyal customers with free standard domestic shipping. Customers who spend over $150 during the calendar year will receive this benefit until December 21, says David Blohm, the online toy seller's CEO. Orvis.com, on the other hand, will target new customers through advertising, offering free shipping with a minimum order for first time customers only.

Interestingly, in-store promotions will take place among 40% of the firms, an apparent recognition of the potentially powerful marriage between bricks and clicks.

So by season's end after the returns are in it will be easy to tell which e-tailers were naughty and which were nice. Just check their champagne glasses.

Natalie Engler is a Gomez senior editor.

Copyright 2000 Gomez Advisors, Inc. contact@gomez.com