Internet Sales Show Big Gains Over Holidays(12/30/05)
December 30, 2005
Internet Sales Show Big Gains Over Holidays
By MICHAEL BARBARO
Online retailers, whose growth was expected to level off after a decade of dizzying gains, experienced a stellar holiday season, according to two preliminary reports released yesterday, as traditional stores like Wal-Mart and Target cemented their place on the Web.
Consumer spending online reached $18.1 billion in November and December, a 25 percent increase over 2004, according to the research firm ComScore Networks.
Nielsen/NetRatings, another research firm, said Web purchases totaled $30.1 billion in the period, an increase of 30 percent. Unlike ComScore, Nielsen includes spending at online auction sites like eBay, accounting for its higher figure.
Online commerce still represents less than 6 percent of all retail sales, but the numbers indicate that it has finally become part of mainstream American shopping.
This holiday season, about 33 percent of American households made an online purchase, up an estimated 10 percent from a year earlier. But analysts do not expect that the number of people shopping online will continue to grow at the same pace. Instead, they say, future sales growth will come as existing online shoppers buy more.
The two sites that popularized online retailing in the late 1990's, eBay and Amazon, firmly dominated it again this holiday season, but the fastest-growing sites were traditional merchants that have become more serious about the Internet.
Wal-Mart was the third most popular site this season, trailing Amazon and eBay, with Target, Best Buy and Circuit City close behind. For the first time, Neiman Marcus and L. L. Bean said they received more orders from their Web sites than telephone orders through their catalogs.
Brick-and-mortar chains "are increasingly a force to be reckoned with online" said Gian Fulgoni, chairman of ComScore.
Walmart.com staged perhaps the biggest online transformation, selling high-end products like $100 cashmere scarves and $250 chocolate gift baskets that were unavailable in its stores and placing ads on popular sites like Yahoo and AOL well before Thanksgiving.
Raul Vazquez, vice president for marketing at the online division of Wal-Mart Stores, called the retailer's sales "very strong."
The new numbers make clear that consumers are branching out from the product categories popular in previous holiday seasons - computer hardware, clothing and electronics. Sales of sports and fitness equipment grew by 49 percent and furniture by 34 percent, suggesting that consumers are becoming more comfortable with the idea of buying a couch or treadmill online.
One other factor that may have propelled online sales this year was higher gasoline costs. Gordon Libby, a 41-year-old school principal in Chesapeake Beach, Md., said he and his wife, Kira, shifted more of their shopping to the Web this year to avoid the 30-mile drive to the nearest mall. The price of gas, he said, "was the nail in the coffin."
Nielsen said online purchases accounted for 27 percent of holiday spending this year, up from 22 percent last year and 16 percent back in 2002. Analysts credited the higher spending to aggressive marketing and significant improvements at once-clunky retail Web sites.
"There is no question this was a really good year," said Donna Hoffman, co-director of the Sloan Center for Internet Retailing at Vanderbilt University, who said that redesigned, user-friendly sites with more products have "removed the final barriers" to online purchases.
Gap, for example, set up an online dressing room where shoppers could clothe models in a variety of styles. For the first time, Best Buy allowed customers to use gift cards to purchase products online. And Neiman Marcus introduced several designers, like Armani and Chloe, to its site.
Retailers also dangled a variety of promotions, from 20 percent off sales (at Figleaves.com, a lingerie site) to tuck-in calls on Thanksgiving, reminding people to shop the next day (requiring a visit to target.com). The most popular, it seemed, was free shipping, which was offered - with conditions - by 79 percent of online retailers, according to Shop.org, an industry trade group.
Mary Rose MacKinnon, a spokeswoman for L. L. Bean, said a free shipping offer this holiday - the company's first in three years - "clearly shifted traffic from our call centers to the Web."
But analysts warned that profits might not keep pace with rising sales. Growing competition has driven up the cost of advertising, particularly so-called pay-per-click marketing sold through search engines like Google and Yahoo.
"It is getting harder to make money online," said Safa Rashtchy, an Internet analyst with the investment firm Piper Jaffray.
Overstock.com sent a shudder through the Internet world this week when it warned that it would miss a holiday sales forecast, briefly knocking down share prices at its rivals, Amazon.com and eBay. Such jitters stem, in part, from the discovery that "it is not cheap to sell on the Web," Mr. Rashtchy said.
Amazon reported a record holiday season, with 108 million orders. As it has in years past, it released a compendium of best-selling items, ranging from the Adidas Men's a3 Megaride Running Shoe to a two-pound package of imported chocolate truffles to the DVD of "Star Wars: Episode III - Revenge of the Sith."
Consumers appeared to procrastinate online, as well as offline this year. Sales in the two weeks before Christmas grew 31 percent over 2004, according to ComScore, which monitors the Internet buying of two million consumers.
Before the holidays began, retailers predicted that the Monday after Thanksgiving would be the busiest online shopping day of the season, reasoning that consumers returning from the holiday weekend would sit at their computers and buy all day. The National Retail Federation even gave it a nickname, Cyber Monday.
The most important day of the season was indeed a Monday. But it was Monday, Dec. 12, two weeks later.
Internet Sales Show Big Gains Over Holidays
By MICHAEL BARBARO
Online retailers, whose growth was expected to level off after a decade of dizzying gains, experienced a stellar holiday season, according to two preliminary reports released yesterday, as traditional stores like Wal-Mart and Target cemented their place on the Web.
Consumer spending online reached $18.1 billion in November and December, a 25 percent increase over 2004, according to the research firm ComScore Networks.
Nielsen/NetRatings, another research firm, said Web purchases totaled $30.1 billion in the period, an increase of 30 percent. Unlike ComScore, Nielsen includes spending at online auction sites like eBay, accounting for its higher figure.
Online commerce still represents less than 6 percent of all retail sales, but the numbers indicate that it has finally become part of mainstream American shopping.
This holiday season, about 33 percent of American households made an online purchase, up an estimated 10 percent from a year earlier. But analysts do not expect that the number of people shopping online will continue to grow at the same pace. Instead, they say, future sales growth will come as existing online shoppers buy more.
The two sites that popularized online retailing in the late 1990's, eBay and Amazon, firmly dominated it again this holiday season, but the fastest-growing sites were traditional merchants that have become more serious about the Internet.
Wal-Mart was the third most popular site this season, trailing Amazon and eBay, with Target, Best Buy and Circuit City close behind. For the first time, Neiman Marcus and L. L. Bean said they received more orders from their Web sites than telephone orders through their catalogs.
Brick-and-mortar chains "are increasingly a force to be reckoned with online" said Gian Fulgoni, chairman of ComScore.
Walmart.com staged perhaps the biggest online transformation, selling high-end products like $100 cashmere scarves and $250 chocolate gift baskets that were unavailable in its stores and placing ads on popular sites like Yahoo and AOL well before Thanksgiving.
Raul Vazquez, vice president for marketing at the online division of Wal-Mart Stores, called the retailer's sales "very strong."
The new numbers make clear that consumers are branching out from the product categories popular in previous holiday seasons - computer hardware, clothing and electronics. Sales of sports and fitness equipment grew by 49 percent and furniture by 34 percent, suggesting that consumers are becoming more comfortable with the idea of buying a couch or treadmill online.
One other factor that may have propelled online sales this year was higher gasoline costs. Gordon Libby, a 41-year-old school principal in Chesapeake Beach, Md., said he and his wife, Kira, shifted more of their shopping to the Web this year to avoid the 30-mile drive to the nearest mall. The price of gas, he said, "was the nail in the coffin."
Nielsen said online purchases accounted for 27 percent of holiday spending this year, up from 22 percent last year and 16 percent back in 2002. Analysts credited the higher spending to aggressive marketing and significant improvements at once-clunky retail Web sites.
"There is no question this was a really good year," said Donna Hoffman, co-director of the Sloan Center for Internet Retailing at Vanderbilt University, who said that redesigned, user-friendly sites with more products have "removed the final barriers" to online purchases.
Gap, for example, set up an online dressing room where shoppers could clothe models in a variety of styles. For the first time, Best Buy allowed customers to use gift cards to purchase products online. And Neiman Marcus introduced several designers, like Armani and Chloe, to its site.
Retailers also dangled a variety of promotions, from 20 percent off sales (at Figleaves.com, a lingerie site) to tuck-in calls on Thanksgiving, reminding people to shop the next day (requiring a visit to target.com). The most popular, it seemed, was free shipping, which was offered - with conditions - by 79 percent of online retailers, according to Shop.org, an industry trade group.
Mary Rose MacKinnon, a spokeswoman for L. L. Bean, said a free shipping offer this holiday - the company's first in three years - "clearly shifted traffic from our call centers to the Web."
But analysts warned that profits might not keep pace with rising sales. Growing competition has driven up the cost of advertising, particularly so-called pay-per-click marketing sold through search engines like Google and Yahoo.
"It is getting harder to make money online," said Safa Rashtchy, an Internet analyst with the investment firm Piper Jaffray.
Overstock.com sent a shudder through the Internet world this week when it warned that it would miss a holiday sales forecast, briefly knocking down share prices at its rivals, Amazon.com and eBay. Such jitters stem, in part, from the discovery that "it is not cheap to sell on the Web," Mr. Rashtchy said.
Amazon reported a record holiday season, with 108 million orders. As it has in years past, it released a compendium of best-selling items, ranging from the Adidas Men's a3 Megaride Running Shoe to a two-pound package of imported chocolate truffles to the DVD of "Star Wars: Episode III - Revenge of the Sith."
Consumers appeared to procrastinate online, as well as offline this year. Sales in the two weeks before Christmas grew 31 percent over 2004, according to ComScore, which monitors the Internet buying of two million consumers.
Before the holidays began, retailers predicted that the Monday after Thanksgiving would be the busiest online shopping day of the season, reasoning that consumers returning from the holiday weekend would sit at their computers and buy all day. The National Retail Federation even gave it a nickname, Cyber Monday.
The most important day of the season was indeed a Monday. But it was Monday, Dec. 12, two weeks later.
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