Holiday Shopping Season Puts E-Commerce to the Test
By BOB TEDESCHI
erhaps the only thing that could match the hype surrounding the holiday shopping season is the hype
surrounding the Internet. Starting this week, consumers get both. At the same time. For a month.
Internet retailers have gathered enough momentum to officially join the mainstream holiday dialogue. Not
only do they have the marketing dollars to get into consumers' living rooms during prime-time, they've
also wrangled their way into just about every other traditional advertising milieu. The message: it's easier,
more economical and just as safe to shop on the Internet as at the local mall. The reality: in some cases,
that's true, but there are still many hurdles remaining before online shopping puts mall developers out of
business.
The Internet shopping buzz started months ago, of course, with most analysts
predicting a banner holiday season for online retailers. A study by Dell
Computer and Louis Harris & Associates found 43 percent of Americans who
use computers say they're likely to shop via the Internet this holiday season, a
330 percent increase over last year. The New York-based Internet market
research company Jupiter Communications forecasts $2.8 billion in online
buying during the holiday season (including travel purchases), compared to $1.1 billion during the same
period last year.
Still, these numbers pale in comparison to the $173 billion that Deloitte & Touche predicts Americans will
spend overall this holiday season. That's because roughly two-thirds of all Americans are still not online,
according to Jupiter Communications. In addition, many Internet users are either wary of electronic
transactions or frustrated by the poor performance of many e-commerce sites.
Therein lies the opportunity for Internet retailers. And this year, they're pulling out all the stops to
convince consumers to try shopping online.
"The hardest part is getting people to make that first purchase," said Wendy Brown, vice president for
electronic commerce at America Online. "So everything we're doing right now is geared toward making
that first purchase easy."
AOL offers its members one-stop shopping through the service's shopping channel, which hosts more than
100 merchants in an environment designed for hand-holding.
Indeed, analysts say electronic retailers need to go the extra mile to compete with traditional stores.
"Online merchants are increasingly offering features that bring value to customers -- things that catalogues
and brick-and-mortar retailers don't have the ability to do," said Ken Cassar, digital commerce analyst for
Jupiter Communications.
For one, Cassar said, they're getting better at helping consumers find what they want, "which is
particularly important now, because holiday shoppers typically don't know what they're looking for when
they log on."
Accordingly, both the major portal sites and dedicated gift sites like 911Gifts.com now offer gift matching
services, whereby users can select characteristics of the recipient, specify a dollar range, then receive via
e-mail a list of suggested items.
Some sites take that service one step further, with one-on-one interactions with salespeople. Clinique
allows customers to e-mail cosmetics specialists with their questions, while eGift.com, a gift site that
launched earlier this month, will soon host a team of customer service representatives who will engage in
live chats with customers who need help finding gifts.
Shopping sites have also added some logic to how they present their merchandise. Rather than endless lists
of sites and stores, they aggregate items into specific categories: Gifts for Him. Gifts for Her. Gifts under
$25. Quick Gifts. "That's a fundamental change for us," said Jeffrey Mallett, chief operating officer for
Yahoo.
The more technically advanced sites have also added the ability to handle one-stop checkouts, for
consumers who buy several items but want to pay with one credit card, through one transaction, and ship
to multiple addresses. "Out of all the new features, that one's the slam dunk for us," said Michael
McCadden, executive vice president for marketing at Gap.
Which new feature will be the air ball?
"The real wild card is gift registries," Cassar said, referring to sites that allow consumers to register their
holiday wish lists online. Noting that it's difficult to envision millions of people registering for gifts at
multiple Web sites, he added, "This year might be an education process. But also, that whole mentality
assumes that gift shopping is efficient -- that you get what you want -- when in reality it's not efficient, and
some people enjoy the adventure of that."
Another common strategy to lure holiday shoppers online is, of course, discount pricing. Some sites are
offering deals to consumers who shop early this season, but as with off-line retailing, it's likely that these
"for a limited time only" offers will be renewed, or replaced by other specials. Among the early bird
offers: Reel.com, an online video retailer, will waive shipping fees if shoppers buy before Thanksgiving.
Gap offers a similar deal, while other sites offer free gift wrapping, gift cards or price discounts.
Not surprisingly, online retailers have also increased their offline advertising efforts to encourage
consumers to shop online. Traditional retailers, like Gap or Lands' End, now routinely include the address
of their Web site in broadcast and print campaigns. Meanwhile, those Internet companies with deep pockets
-- or deep-pocketed partners -- are embracing offline promotions of their own. FragranceCounter, a
Web-based perfume retailer, is about to launch a $1 million national radio advertising campaign, while
eToys, an online toy site, got a boost for its own holiday effort by "being chosen as the poster child for the
Visa campaign," said Phillip Polishook, vice president for marketing at eToys.
Despite all the hoopla, some industry observers are offering a "be careful what you wish for" caution if
sales prove as strong as analysts predict. Since most e-commerce sites lack the technology to track their
inventory on a real-time basis, some shoppers could unwittingly pay for goods that are, in fact, out of
stock.
"People who have raised a lot of money to become online dominators may see that they've overstepped,"
said Arno Harris, vice president of marketing for 911Gifts.com. "They can overcommit to customers
without having inventory, they can over-order inventory and end up sitting on a half-million dollars in
wreaths ... Those folks will blow relationships with customers by doing a bad job with their needs."
How real a possibility is it that online customers can get burned? "It's a very real possibility," said Maria
LaTour Kadison, senior online retail analyst with Forrester Research, a market research firm in
Cambridge, Mass. "There are going to be a lot of surprises with gifts that don't show up until December
28."
That's a situation other retailers will be watching closely, said Donna Iucolano, chair of the statistics
committee of Shop.org, an online retailer trade group. "If a shopper goes to one site and has a bad
experience, it might turn them off to the idea of online shopping in general," she said.
Even if some sites fail to deliver, the damage to the online retail industry probably won't be permanent.
But if the holiday shopping season fails to live up to its billing in what is expected to be a breakthrough
year, watch for the finger-pointing. And if you're planning on buying gifts online, it may be a good idea
to confirm that they were shipped in time -- or have a back-up trip to the mall planned, just in case.
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