Originally created 12/06/01

Online stores ring up record sales



When Sylvia Teague wants to do her holiday shopping at a major retailer, she doesn't trek hundreds of miles from her home in rural Fortuna, Calif.

Instead, she cruises the Internet to Eddie Bauer, Lands' End and other online stores to order what she wants.

"Even if I were in a big city, going to a mall at this time of year is a nightmare," she said. "It's a lot easier to shop with a coffee cup in your hand."

Teague and millions of others are helping online stores ring up record sales this year, even as traditional retailers are slashing prices in an effort to stay afloat during the current recession.

A combination of trends is fueling a boost in online shopping during what could be a soft season for retailers: a population comfortable with buying online; less traveling; more holiday gift shipping; and some weeding out of the competition by the dot-com shake-out.

"As traditional retailers brace for a holiday season fraught with uncertainty, online retailers are facing the opposite - the first moderate-growth, fairly predictable holiday season," wrote Ken Cassar, an analyst with Jupiter Media Metrix, in a recent report.

Jupiter predicts online holiday shopping and travel sales will total about $11.9 billion this year, an 11 percent climb from 2000. That's still just 1.3 percent of the estimated $890 billion that will be spent in total retail shopping for the holidays.

NetRatings, a Milpitas, Calif., company that tracks online behavior, projects $10 billion in online holiday sales alone, up from $6.9 billion a year ago.

And the numbers posted so far this season seem to bear out the forecasts.

Bizrate.com, which tracks online sales, said post-Thanksgiving shopping over the Internet is up 28 percent from last year.

And major retailers such as Amazon and Wal-Mart reported strong increases in sales.

Amazon, for instance, took orders for 700,000 more items over the three-day Thanksgiving weekend than it did for the same period in 2000. "The virtual aisles are full," quipped Amazon spokesman Bill Curry.

Yet even with growing sales, online stores will likely see less revenue per customer as shoppers rein in their buying, analysts say. And as the pool of online shoppers grows, its affluence wanes as more moderate- and lower-income people join a group up to now dominated by fairly well-heeled Internet users.

Amazon's best-seller over the Thanksgiving weekend was a $99 DVD player, said Curry, an indication that bargain hunters were out in force.

While online stores won't see the explosive 54 percent growth in sales they experienced in 2000, that is not necessarily a bad thing, said Rob Leathern, another Jupiter analyst.

With slower growth, it will be easier to fill customer orders, ship on time and generally operate in a less frantic environment, he said.

In addition, with fewer dot-coms vying for customers, there will be fewer money-sapping sales promotions that have plagued online retailers over the last couple of holiday seasons, leaving many with little in the way of profit.

Consumers, for example, aren't likely to get free shipping on every item they order. And they won't see $50 certificates for every $300 in purchases like those one e-retailer offered last year, Lathern said.

Instead, companies like Amazon are offering free shipping only with purchases of $99 or more.

While consumers have a variety of reasons for shopping online, the vast majority cite convenience.

One ardent online shopper is Cindi Rumenapp of Sacramento, who says she never sets foot in retail establishments except to buy groceries.

"I buy videos at Suncoast.com and pet food at Petco.com, and I use Harry & David's online site (for gifts)," Rumenapp said. "I just don't like going to the stores and running into crowds."

Joy Korstjens of Sacramento likes the fact that she can shop online at 1 a.m. if the mood strikes her. But it's the ease of comparison shopping that really sets the online world apart. "I saved $90 on one item and the search took only about 25 minutes," Korstjens said.

Even traditional retailers are seeing benefits from the online wave, Leathern, the Jupiter analyst, said. Many people are browsing for gift ideas online and then coming into stores to make their purchases, he said. And retailers like Circuit City are encouraging customers to order online and then pick up their merchandise at the store, saving shipping costs and speeding delivery times.

Catalog retailer Lands' End is also seeing significant growth in its online efforts. Its third-quarter online sales were up 33 percent over last year; the Internet now accounts for 25 percent of the company's revenue, said Lands' End spokeswoman Emily Leuthner.