Saturday, December 19, 1998, San Jose Mercury News, San Jose, California
<Embedded nuggets worth a read. Note that Judy Lin is a long-time SI poster.>
Online retailers exceeding
early projections
BY CHARLIE MCCOLLUM
Mercury News Retail Writer
The week before Thanksgiving, Judy Lin figured she might dip her toe
into the cyberspace waters and buy a couple of her Christmas gifts
online.
This week, Lin, an investment banker from Saratoga and single
mother of two, finished her holiday shopping without ever actually
setting foot in a mall or a Wal-Mart or a Toys R Us.
''I bought a couple of special things at a small store in Los Gatos, the
rest I got entirely online: toys, books, clothes, everything,'' she said.
''It's all here and ready to wrap. And it was so easy and less
stressful.''
The evidence is mainly anecdotal but there are growing signs that even
the most optimistic early projections of online retail sales this holiday
season may have been too conservative.
Internet analysts such as Jupiter Communications and Forrester
Research are now saying their initial projections will certainly be met
and probably exceeded. Web retailers from online pioneers
Amazon.com and 800FLOWERS.com to newcomers such as
macys.com and the gap.com are reporting huge surges of Internet
purchases, sometimes triple what they had expected. Companies
involved in the infrastructure of the Internet such as Visa and Federal
Express say credit card purchases and shipments have surged since
Thanksgiving week.
If holiday Web sales climb to $3 billion this year -- something some
experts now believe is entirely possible -- it will still be less than 2
percent of the $165 billion spent from Thanksgiving through
Christmas. But just two years ago, online shopping was not even a
blip on the retail radar screen.
''All the signs are that this holiday season is going to be e-commerce's
first big success,'' said Nicole Vanderbilt, a senior analyst with Jupiter
Communications, which originally predicted holiday sales would
double to $2.3 billion.
''Sales are going to at least going to meet our projections -- which we
thought were pretty aggressive. And I think they'll actually exceed
those projections.''
''There's been just a tremendous run-up in visits to retail Web sites,''
said Bob Ivins, senior vice president of Media Metrix, which has been
monitoring the traffic at selected retail sites.
Ivins said that in some retail categories -- toys, apparel and music --
traffic has been tripling each week over the previous week since
Thanksgiving. ''And that's just phenomenal. I think the question for
many Web retailers now is, 'Are we prepared for this kind of traffic,
this kind of success?' '' he noted.
Joe Vause, vice president of electronic commerce for Visa USA,
said, ''The companies we worked with are doubling and tripling the
benchmarks in terms of sales they had set before the season started.''
According to a recent report by America Online, sales of toys through
Web merchants associated with the company have increased 300
percent since last year; flowers, candy and cards are up 275 percent;
electronics and videos, up 230 percent; and apparel, up 210 percent.
While not divulging hard numbers, individual sites say they are seeing
similar increases.
Bluefly.com, which sells brand-name clothing, says its weekly sales
are up 700 percent since early November. The Web site for Barnes
& Noble, the giant bookseller, is reporting that weekly sales have
jumped 400 percent since late summer. And 800FLOWERS.com,
which first went on the Web in 1995, says its holiday sales have
already increased 300 percent over last year with a week to go.
''It has been fantastic,'' said Chris McCann, senior vice president for
1-800-FLOWERS. ''It's such a wave that we've revised our
estimates and now expect Internet sales to exceed our traditional 800
phone sales within two years.''
Web experts and retailers all cite the same key reasons for the
unexpected surge in holiday online buying:
The growing presence of major retail names on the Web. A wide
range of well-known retailing names -- from Macy's and the Gap to
Levi's and Estee Lauder to Victoria's Secret and REI, the outdoors
retailer -- either entered cyberspace for the first time or dramatically
expanded their sites just prior to Thanksgiving. The familiar brand
names are pulling in customers who know them from the physical
world.
''Now, with all the established brand names coming online, people
feel more comfortable (buying online),'' said Ken Cassar, a Jupiter
Communications analyst.
Increased Internet advertising. Not the banners that dot your
computer screen when you go to a Web site but advertising offline.
Web companies like Amazon.com, Yahoo, Excite, macys.com and
the Gap have all launched major television, radio and print ad
campaigns within the past six months. Some e-commerce companies
have linked up with Mastercard and Visa in a series of stylish
campaigns that appear to have legitimized online shopping for many
consumers. In fact, the success of eToys.com -- the online toy and
game store that may be the biggest single winner during the holiday
shopping season -- is being attributed largely to its ads with Visa.
''Web merchants are now being very aggressive in terms of
advertising,'' said Vause. ''You see Web names on TV, on
billboards, on radio and on buses -- that's all new within the past
couple of months.''
Within the past month, almost every major national magazine and
most of the big daily newspapers have published cover or front page
stories on the growth of online shopping. ''In a way, you guys (the
press) had a lot to do with it, telling people what was available and
calming fears about credit card security,'' said Vanderbilt.
''Hey, listen, having Martha Stewart with a (computer) mouse and a
Santa hat on the cover of Newsweek sure didn't hurt sales.''
Now the question for e-commerce is whether the customers flocking
online will come back after the holidays.
''Many merchants knew how critical this time frame was going to be.''
said Vause. ''They knew this was their greatest opportunity to
capture new customers. And they had to perform if they wanted to
retain those customers.''
And there have been some performance problems such as
non-delivery of merchandise and Web sites slowing to a crawl or
crashing because of unexpectedly heavy traffic. ''A number of
retailers weren't prepared for this kind of growth and, in a sense,
were the victims of their own success,'' said Ivins.
Nevertheless, customers seemed to be generally pleased -- excusing
the occasional problem as a decent trade-off for not having to fight
the crowds at the mall, paying what they perceive as cheaper prices
and finding an array of goods at their fingertips.
''This doesn't mean I'll never go to a store again. Sometimes you
need something right away or you want to physically hold what you
buy,'' said Jennifer Harrison, a computer programmer from Palo Alto
who bought most of her gifts online this season.
''But there are a lot of people who don't have a lot of time and just
can't drag themselves down to the mall. That's the reason online
shopping is going to work.''
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