More Indications of a Healthy Holiday Season Online

A report by eMarketer expects a record quarter for online consumer spending in the fourth quarter of 2001, and more than 14 million more shoppers than went online than in 2000.

In its “U.S. Holiday Shopping Report”, eMarketer forecasts online consumer spending to reach $10.7 billion in the fourth quarter of 2001, a 20.2 percent increase over last year. The report also predicts that 58.7 million U.S. residents will buy online in the fourth quarter of 2001, spending an average of $182.25.

“The economic malaise will constrain online and overall retail spending this year,” said eMarketer CEO Geoff Ramsey. “Unlike previous years where online spending rode the roller coaster straight up, regardless of overall retail activity, this year e-commerce will be more closely aligned with general patterns of consumer spending.”

In 2000, online spending in the fourth quarter rose 71 percent over 1999, far outpacing the single-digit retail sales growth. And while the 2001 online holiday season will be affected by the economic downturn, eMarketer expects the influx of additional shoppers will spur growth that outpaces the 2.2 percent rise in overall U.S. retail sales predicted by the National Retail Federation.

Internet will lift offline sales
The Internet should also help retailers in ways that won’t directly show up on the bottom line. A survey of 1,867 online shoppers by Active Decisions found that retailer and manufacturer Web sites influence twice as many offline sales as online sales. Categories such as appliances, the study found, could drive as many as nine additional sales offline for every sale online.

Other findings from the Active Decisions survey include:

• 37 percent use a manufacturer’s site before buying at a physical store.
• 32 percent use a retailer’s site before buying at a physical store.
• 61 percent of those visiting a retailer’s site said that it strongly influenced which product they ultimately bought.
• 65 percent of those visiting a retailer’s site said that it influenced their decision to visit the company’s physical store.

“The evidence suggests that an online presence has a far greater financial impact on a business than previously thought,” said Daniel Greenberg, vice president of marketing for Active Decisions. “In order to dramatically boost revenues, manufacturers and retailers should do everything in their power to ‘lock in’ prospects when they visit their Web site. We have heard from countless retailers that people are walking into stores with a printout of the products they intend to buy.”

As for that recession…
With the long-term economy still questionable, Forrester Research surveyed 9,000 online consumers in an effort to gauge how well online retail could withstand a prolonged recession. The findings revealed that e-commerce will grow through the downturn because most Web buyers have a high income, and that has thus far insulated them from the economic turmoil in the United States. E-commerce is also aided by the fact that many product categories that helped stimulate e-commerce growth in the past couple years are the same product categories in which consumers have already decreased their spending because of the poor economy.

“The good news is that the 16 percent of online consumers have already decreased their household spending only make up 14 percent of total Net sales,” said Christopher Kelley, an analyst at Forrester. “Demographically speaking, they are not the most prominent consumers because they have the least amount of money to spend. Furthermore, 19 percent of Web buyers highly affected by the downturn are ambivalent toward technology at best and are less likely to turn to the Web as a preferred shopping channel.”

More than one-third of Web buyers are cautious, but at this time they have only decreased their household spending slightly. This group of shoppers, which is concerned about eventually being affected by the economic situation, currently make up 33 percent of e-commerce spending. On a positive note, 48 percent of Web buyers are unconcerned about the economy; these consumers are relatively affluent compared with their counterparts, and, therefore, are more attractive customers. They are not concerned that the current economic instability will affect them and are responsible for 52 percent of total online spending.

Although consumers have also decreased spending on entertainment products, including music, videos and home decor, Forrester found their frugality won’t have a significant impact on overall e-commerce revenues because entertainment products are not big revenue generators. Staple goods also generate a small amount of revenue online, so although consumers will not curb their spending much on these goods, the overall impact on e-commerce growth from these products is negligible.

Travel, on the other hand, is now the biggest threat to e-commerce. Once the biggest revenue generator, it is now an expense many Web buyers forgo during unfavorable economic times. Similarly, computer hardware and consumer electronics bring down online shopping numbers because consumers are more likely to put off expensive purchases during a poor economy.

“Online retail is projected to reach more than $74 billion in 2002. This amount could change, however, if the economic slowdown turns into a long-term recession or if the economy makes a miraculous recovery in 2002,” Kelley said. “If things worsen in the coming year, consumers will tighten their budgets further, but e-commerce still won’t shrink. Conversely, if the current economic storm passes early, e-commerce will experience substantial growth in 2002.”