Happy holidays for e-retailers

Santa Claus is winning out over the Grinch for online merchants this holiday season, as sales and traffic for December have hit record numbers so far.

Santa Claus is winning out over the Grinch for online merchants this holiday season, as sales and traffic for December have hit record numbers so far.

The number of online shoppers surged 53 percent during the second week in December, setting a new record compared with last season, according to Nielsen//NetRatings, which tracks Internet traffic.

"In the last five weeks, holiday shopping growth has consistently exceeded last year's results, and the trend indicates that there is at least one more week of favorable growth ahead," said Sean Kaldor, vice president of e-commerce at Nielsen//NetRatings.

One of things pushing Net retail sales higher this year is the large presence of established brick-and-mortar retailers that have moved online, including BestBuy.com; BlueLight.com, which is Kmart's online site; Target.com; and Wal-Mart.com. Brick-and-mortar sites have grown 103 percent since the beginning of the season, gaining ground on pure-play Internet retailers, which are up 77 percent.

"Brick-and-mortar sites are tapping into their large, established customer bases and leveraging their enormous promotional budgets to drive millions of shoppers online," Kaldor said.

Internet shopping has been going smoothly this year, compared with last season's disasters that included Web sites freezing up, merchants losing orders and goods not showing up in time for the big event. Some outages have occurred with sites such as Amazon.com, BestBuy.com and Wal-Mar.com, but the sites were only down briefly.

Overall, 92 percent of attempted holiday purchases over the Internet are successful this season, according to the results of Andersen Consulting's second annual U.S. fulfillment study. In addition, the study showed that the service level gaps that previously existed between online retailers, traditional retailers and catalogers are either rapidly closing, or have completely closed.

"E-retailers are being very careful to make sure consumers are more aware of deadlines, even at the risk of losing a sale," said Robert Mann, associate partner at Andersen Consulting. "They want to be sure they can guarantee delivery, rather than try to push the date."

For example, the majority of Web sites surveyed in the 2000 study indicated that lead times for standard shipment modes are averaging nearly 10 days, compared with claims of about five days last year. Web sites are reminding consumers that Christmas is on a Monday this year, which may increase the need for late shoppers to pay extra for express shipping.

Web retailers have been dangling a number of incentives, such as free shipping, to consumers who shop early.

A record number of shoppers hit Web sites last week, pushing online sales to a record of US$222.4 million Dec. 1 and US$225.5 million on Dec. 12, according to BizRate.com, a Los Angeles e-commerce tracking company. Last year, the Web's peak shopping day fell on Dec. 13, when sales climbed to US$177.9 million. BizRate officials said that from this point forward, guarantees of deliver by Christmas start to disappear.

To keep people buying, BlueLight has offered all of its shoppers free upgrades to priority and express mail delivery this week.

More expensive overnight delivery is still an option through Dec. 23, assuming products are still available at Amazon, said Ling Hong, an Amazon spokeswoman. "We'll even deliver on Christmas day," she said.

Amazon has been having a blockbuster holiday season. It has already sold more than 26 million items, compared with 20 million items in all of last year's holiday season, Hong said. "It proves customers will buy all kinds of things online if we offer them," she said.

In addition to books and music, the big sellers on Amazon have been toys and electronics, Hong said. Earlier this year, Amazon entered into an agreement with Toysrus.com in which Toysrus.com would provide the inventory and Amazon would take the orders and fill them.

Most online retailers do not provide revenue figures until after the holiday season, but many of them said that they expect to meet sales targets this holiday season. "Sales and traffic continue to definitely meet our expectations," said Patty Morris, a spokeswoman at Target.com. "We do seem to be right on track."

Target.com offers more than 15,000 items online, and consumers seem to be buying the same items online as in the store, Morris said. Scooters, digital cameras, DVDs and Poo-Chi the robotic dog have been extremely popular, she said.

Traffic to auction sites has also been soaring during the holidays. The number of consumers visiting auction giant eBay each day is 60 percent greater than the number visiting Amazon, according to a new report from Jupiter Media Metrix. "Clearly, consumers are embracing the benefits of online shopping," said BizRate Chief Executive Chuck Davis.

Sales of home and garden products have shown the greatest growth this holiday season, BizRate reported, with sales up 250 percent over the same period last year. Spending on home and garden products now accounts for 7 percent of all holiday sales. Toys have also skyrocketed, with a 144 percent increase in sales over last year. Toys now account for 8 percent of all holiday sales.

Not all news is positive this holiday season. Sales of computer hardware and software, which BizRate projected would grow by 80 percent this year compared with last season, have only increased 33 percent this year.

GartnerGroup projected shoppers would spend $19 billion in the fourth quarter, but it's too early to tell if online retailers will hit that target, said Robert Labatt, the company's research director. "The amount of Internet retail activity is definitely up from last year," Labatt said. "Everyone will be over last season."

Jupiter forecast online sales to top US$11.6 billion this holiday season, and everything is on track to meet that mark, said Heather Dougherty, retail analyst at the company. A lot of shoppers got burned last year because gifts didn't arrive in time for Christmas, but Dougherty doesn't expect to see the same chaos. "There's always the unplanned exception," she said. "This year, it won't be as horrible. Retailers are taking a lot more precautions."

Last holiday season, many Internet sellers aggressively competed by claiming to be able ship very quickly, from overnight to 48 or 72 hours. Unfortunately, some sellers were unable to meet those shipment claims, resulting in disappointed customers.

The Federal Trade Commission fined seven well-known online retailers - including Macys.com, KBkids.com and Toyrus.com - for late shipments. The companies paid a combined total of more than US$1.5 million in penalties. This year, 35 million online holiday shoppers are expected to make purchases online, up from 20 million last year, according to analysts' estimates.

In November, the FTC sent warning letters to more than 100 online retailers, putting them on alert that the federal regulators would take action against them if they didn't deliver goods as promised, said Heather Hippsley, assistant director of enforcement at the FTC. "Now we're just waiting to see if things happen," she said.