Despite Slow Start, E-Tail Expects Big Holiday Season

Online sales are expected to reach $12.5 billion during the 2000 holiday season, according to The NPD Group, Inc., which credits a surge in the number of online buyers and an increase in spending by holiday 1999 buyers.

According to NPD, eight in 10 Web users plan to shop online to browse for products and services this holiday season. Fifty-four million individuals plan to go ahead and complete an online transaction by purchasing at least one product or service on the Net. This is approximately two-thirds of the active Internet population.

Many online merchants can also expect repeat customers. Ninety-five percent of those who bought online during holiday 1999 plan to do so again. However, these consumers comprise only half of Internet users that plan to buy online in holiday 2000, giving evidence to a surge in online holiday buyers. Additionally, 56 percent of those who bought during the previous holiday season said they expect to spend more money online this season.

“We are quite optimistic about online sales this holiday season,” said Pamela J. Smith, vice president of NPD Online. “All of the elements seem to be lined up for a good turn out of online buyers. If the sites are ready for them, there should be a lot of cheering come year end.” is the site at which most prospective online buyers plan to purchase. According to NPD’s report, more respondents said that they intend to purchase from than from, and combined. Of the department stores with an online presence, JC Penney was the clear leader. Consumers also estimate that 69 percent of the sites from which they intend to buy will be sites from which they have bought in the past. Being cautious about receiving orders in time for the holidays, most consumers plan to make the majority of their online purchases the week after Thanksgiving.

The results of the first wave of Nielsen//NetRatings Holiday E-Commerce Index (obviously taken before Thanksgiving) found that holiday shopping traffic is down at the start of the 2000 season, when compared to last year. In 1999, Nielsen//NetRatings reported that the holiday season began the week of Nov. 7, when traffic to many e-commerce sites skyrocketed.

“Last year’s holiday shopping season began with a big bang right after people put away their Halloween costumes,” said Sean Kaldor, VP of eCommerce at NetRatings. “This year we are not seeing the same trends, suggesting that other factors took the focus off the impending holidays, such as less dot-com advertising or interest in the Presidential election.”

Nielsen//NetRatings Holiday E-Commerce Index, 1999 vs. 2000
Category Change in
Unique Audience

10/31/99 – 11/7/99
Change in
Unique Audience

10/29/00 – 11/5/00
Consumer electronics 55.9% 16.2%
Toys & games 46.9% -0.5%
Computer hardware 18.5% -6.5%
Apparel 13.4% 9.2%
Books/music/video 12.5% 4.9%
Specialty gifts 1.0% 12.5%
Source: Nielsen//NetRatings

More good news for e-tailers comes from Jupiter Research, which estimates that 6.3 million US residents will spend more than 50 percent of their holiday budget online this year — an increase of 294 percent from 1999 when only 1.6 million spent the majority of their budget shopping online. In direct contrast to Nielsen//NetRatings’ report, Media Metrix has revealed a 12-month audience measurement trend showing that the proportion of visitors to shopping sites throughout 2000 already resembles the holiday season of 1999. The data indicates that nearly the same proportion of online users visited retail sites in August 2000 as did in December 1999, 74.9 percent and 73.3 percent, respectively.

When all is said and done, Jupiter estimates that a total of 35 million people in the US will purchase gifts online this holiday season, versus 20 million who shopped online last year. This increase in consumers’ online spending contributes to the overall rise in dollars spent online this season, $11.6 billion in December 2000 up from $7.0 billion during the same period last year. According to Jupiter analysts, most online holiday shoppers (79 percent) plan to spend at least 10 percent of their total 2000 holiday budget online; 18 percent expect to spend more than 50 percent of their holiday shopping dollars on the Internet this season, according to Jupiter analysts.

And what of those shoppers who went online last and had problems completing their purchases. According to research by The Boston Consulting Group (BCG) and Harris Interactive, 96 percent of last year’s online shoppers intend to purchase gifts online again this year, even though more than half experienced problems last year.

“In spite of a high incidence of out-of-stock items, system crashes, poor selection, and delivery problems, the vast majority of last year’s online holiday shoppers said they are willing to give it another go. And they are also willing to spend more this time around,” said Michael Sullivan, BCG Senior VP. “Many consumer aren’t, however, prepared to go back to the sites where they experienced the purchase failure in the first place. They will go to different online retailers.”

The BCG study also found that while holiday online shoppers expect to spend 22 percent of their holiday budgets online, the Internet will also influence how they spend the rest. Two-thirds say they will use the Internet to compare prices before they buy an item from a store. Even among the online population that does not plan to purchase online, more than one-quarter will use the Internet to compare prices, review product information, and generate gift ideas before they head out to stores.

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