Holiday E-Commerce: More Shoppers, More Spending, More Problems

E-tailing executives say Santa is bringing loads of orders this year, according to IDC, but a number of surveys suggest he should add better return policies and site performance to his sleigh.

What the E-Tailers Say
According to a survey of Internet executives by International Data Corp. (IDC), online retailers are meeting or exceeding their expectations for holiday sales revenue, and customer service has greatly improved over last year.

IDC surveyed 50 companies during the second week of December as part of its Executive ePanel. In total, 83 percent of e-tailers say revenues are up from last year. Of those, 26 percent have seen sales more than double, while another 23 percent are seeing 61 to 100 percent growth. More than half (55 percent) of the companies surveyed say sales are right in line with expectations, and another 29 percent say sales are higher than expected.

What does all of this mean?

“If companies have set Wall Street expectations appropriately, then the industry should be delighted with consumer e-commerce revenues from this holiday season,” said Sean Kaldor, Group VP of IDC’s eBusiness Advisory Services.

It also means that merchants think they may have cured many of the growing pains that reared their ugly heads at this time last year. Executives report a reduction in site outages and in order fulfillment problems this year when compared to last year. A survey by Andersen Consulting, however, still managed to find that one-quarter of attempted holiday Internet purchases fail, so while the news appear to be good, it could potentially be even better.

Why All the Good News?
Obviously, more people are taking to the Internet to do their shopping. Online shoppers spent more than $1.2 billion during the week of Dec. 6-12, according to a survey of 3,004 home-based Internet users by PC Data Online and Goldman Sachs. It is believed to be the first time online spending passed the $1 billion mark in a single week. The $1.2 billion is double the amount spent during the week of Thanksgiving.

The Internet toy stores are among the ones raking in the most traffic and the dollars, with PC Data estimating more than 1.7 million buyers during the week of Dec. 6-12. Online categories such as apparel and electronics also saw big jumps during the week. The rate of visitors making apparel purchases increased 64.5 percent over the previous week.

Reasons for Not Shopping Online
Dec. 99 July 99
Can’t see and touch 41% 56%
Can’t easily return 32% 47%
Shipping charges 33% 39%
Source: Greenfield Online

More consumers are comfortable making online purchases this year, which should also help account for the traffic increase. According to a survey by Greenfield Online, consumers are more comfortable using their credit cards online than they were just this past summer. In July, Greenfield found that 43 percent of those refusing to shop online cited credit card safety as the reason. During the first week of December, only 35 percent held this view.

The increase in Internet shopping this holiday season may be in part price-driven, according to a recent KPMG LLP survey.

Sixty percent of 225 consumer market executives surveyed expect to pay less for online purchases than they would in a store or through a catalog, while 37 percent expect to pay about the same amount. Only 3 percent of those surveyed expect to pay more for electronic purchases.

“E-tailers that are competing on price alone may find that they do not have a sustainable strategy going forward,” says Mark Larson, KPMG’s national partner-in-charge of the retail industry segment. “The weaker online retailers are not likely to survive in an environment where price is the only driver.”

But price alone won’t help e-tailers become a financial success.

“Successful e-tailers need interactive Web sites that are integrated with their physical stores and offer a sense of community,” Larson said. “They also need to improve customer service by having products in stock and delivering merchandise in a reasonable period of time.”

Customer satisfaction with online shopping appears high, with 66 percent of respondents saying they are “very satisfied” with their overall online holiday shopping experience. When asked about specific online features, more than half of those surveyed say they are “very satisfied” with Web site response time, product availability, product information, product delivery and price.

“The customer satisfaction levels are good news for e-tailers,” Larson said, “but on the flip side, more than one-third of respondents say they were only ‘somewhat satisfied’ or ‘not at all satisfied’ with specific areas. In other words, consumers are telling e-tailers that there is a still a lot of room for improvement in customer service.”

What Can They Do Better? (or, many unhappy returns)
A survey of 9,800 consumers by found that 89 percent say return policies influence their decision to shop online. BizRate estimates that at least 5 percent of the 36 million online orders it forecasts for the 1999 holiday season will be returned.

Simply having a return policy is not enough, the study found. Consumers said the most important factor for an optimal online return policy would be a 100 percent money-back guarantee, followed by not being charged a late fee to have the merchant restock the product. Certain attributes of a return policy can actually drive potential customers away from online shops. These include the inability to receive credit on a credit or debit card (85 percent), followed by a limited time to return a product (68 percent). Other attributes that online buyers consider important are whether the merchant allows products to be returned by mail (66 percent) and the ability to exchange a product for another item (58 percent). Sixty-two percent of consumers said they would prefer to return products by mail instead of heading to a brick-and-mortar store.

The BizRate survey also found that refunds (59 percent) are the leading form of return action taken, followed by exchanges at 27 percent, and credit at an online or offline store. The most common online purchases returned are clothing (27 percent), software (20 percent), and books (15 percent).

A survey of the usability of e-commerce sites by the Software & Information Industry Association found that purchasing processes were smooth, but the remaining share provided enough annoyance to make shoppers abandon their purchases. Seventy percent of the shoppers in the survey were sophisticated online shoppers, 70 percent of whom shop online at least once a month. One area where problems surfaced for the shoppers was their ability to find further information on products and services offered. Seventeen percent of respondents had a question about products or services while shopping. While three-quarters of them of them were able to find an FAQ section, nearly 20 percent of those with questions were able to resolve their problems using the site.

A survey by, acustomer service provider for Web-based retailers, found that 32 percent of online shoppers said there were one or more online stores that they would be reluctant to shop with again, with 19 percent saying that two or more online retailers had earned their disapproval. Shoppers in the 18-24 age group were particularly critical of their online merchants, with 46 percent saying they would be reluctant to shop at one or more Internet retailers again.

Men are more critical of online shopping than women, the survey found. Thirty-five percent of male shoppers could name one or more Internet retailers they would be reluctant to shop with again, compared to 28 percent of women. Internet shoppers listed poor communication with Internet merchants as their top gripe. Nearly 30 percent said they wanted to ask the online retailer a question, but there was no way to do so.

Despite the confidence e-tailing executives have in their infrastructure, the World Wide Wait may be living up to its name, especially when it comes to the top e-tail sites. The TurboSanta report from Service Metrics, which measures the Web site performance of the top 120 retail sites (including the top 100 e-tailers according to the National Retail Federation), found the performance of these sites is degrading as Dec. 25 approaches.

During the week of Dec. 13-19, the performance of the index fell to 5.74 seconds from 5.65 seconds the previous week. Overall ability, a measurement of how often a Web site is available to users improved slightly during the week to 97 percent from 96 percent. The TurboSanta index has seen a degradation in performance four weeks in a row.

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