New York - 'Tis the season for consumers to do their shopping online, and while analysts said such sales could soar as high as $8 billion for the full 1999 year, the holiday season is also the moment of truth for many Web retailers who must prove their worth.
Analysts predict this holiday sales season, which typically accounts for 50 percent or more of traditional retail sales, will also be a make-or-break quarter for the proliferating number of consumer "e-tailing," or electronic, retail sites.
With so many retailers seeking to angle into the game, analysts said competitive prices and a
clever advertising campaign will not be enough to make a company profitable. Rather, the
ability to build customer loyalty -- and repeat shopping visits -- is seen as key to success or
failure.
"The end game is that many of these new Internet e-commerce businesses will be gone by
January," said John Grace, executive director of brand consultant Interbrand, a unit of
Omnicom Group Inc. (NYSE:OMC). "They can't all win."
"Most of these e-commerce offerings are trying to seize the day with a quick hit, hoping that
if they get the eyeballs, they'll get the business," Grace said. "Our advice to these
companies is you may get some of them once, but you'll never see them again."
Investors are confident Shares of diversified retailer Amazon.com Inc. (Nasdaq:AMZN) closed 5-7/8
higher at 93-1/8. Shares of pioneering Internet toy-seller eToys Inc. (Nasdaq:ETYS) gained 2-1/4 to 66-5/8. Online shopping mall Cybershop.com Inc. (Nasdaq:CYSP) rose 3-5/16 to close at 12-7/8. All stocks trade on the Nasdaq
stock market.
"While it is unclear whether holiday gift shopping has begun across the Web, we believe it
has clearly begun on those sites most closely tied to gift shopping," Lauren Cooks Levitan,
the online retailing analyst for BancBoston Robertson Stephens said in a research report
earlier this week.
She said winners heading into the Thanksgiving weekend included eToys, KBKids, the
online toy unit of Consolidated Stores Corp. (NYSE:CNS), Victoria's Secret, the
lingerie business of Intimate Brands Inc. (NYSE:IBI) and Wine.com, in the build-up
to the new year.
Overall, analysts expect online holiday sales to reach anywhere between $4 billion to $6
billion this season, more than double the amount last year, with toys and consumer
electronics being the top sellers. For the full 1999 year, broker Volpe, Brown Whelan
estimates $8.5 billion in spending, up from $3.0 billion in 1998.
"This year a lot of the dollars are going to come from consumers who are very experienced
online shoppers," said Seema Williams, an online retail analyst with Forrester Research Inc.
Overcoming technical challenges
This year companies are lining up to deal with some of the technical challenges that led to
crashes at a variety of sites amid last year's heavy traffic. Other retailers are busy sweetening
their customer service programs, analysts said.
Most industry watchers agree that the Web's biggest names such as America Online Inc. (NYSE: AOL) and Yahoo! Inc. (Nasdaq: YHOO), as well as
Amazon.com and eToys, will clearly benefit from already having a captive audience and an
established brand.
Proliferating comparison shopping and online auction sites are expected to contract unless
they succeed in making consumers aware of their site and keep customers coming back.
"We had a lot of trouble handling the traffic and the capacity last year," said Jeff Tauber,
chief executive of Web retailer CyberShop.com Inc. "What we've really done
this year is spent a lot of time focusing on not just Web site capacity, but shipping and
customer service."
Neither pure Internet retailers nor traditional retailers with an online presence will be immune
to scrutiny from public shareholders and private financiers.
"They're going to have to take pretty big gambles as far as sales and marketing," said Ken
Cassar, an online retail analyst with Jupiter Communications.
"There are several online merchants that actually have advertising obligations that are
greater than their bank accounts and they are certainly hoping that sales will make up for it.
I'm not sure that will be the case," Cassar said.
In anticipation of strong online retail sales, investors bid up the share prices of selective
names on Friday, the first day of the official U.S. holiday shopping season.
About 4.3 million households have been shopping online for at least two years, and they are
expected to spend up to about $650 online each, according to Forrester Research
estimates. Women shoppers online could exceed men for the first time, noted Ms. Levitan,
the Robertson Stephens analyst.
'We had a lot of trouble handling the traffic and the capacity last year. What we've really done
this year is spent a lot of time focusing on not just Web site capacity, but shipping and
customer service.'
-- Jeff Tauber,
chief executive of Web retailer CyberShop.com Inc.
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