Online Gift Spending Up, Apparel Sales Remain a Question

Internet gift spending rose by 17 percent last week, despite a modest decrease in overall Internet spending, according to data revealed by a weekly survey of holiday Internet shopping, conducted by Goldman Sachs and PC Data Online.

Internet shoppers spent $208 million from home last week, down $13 million from the previous week. Over a quarter of this total, $54 million, was spent on gifts, the survey found.

“The shift toward gift-buying on the Internet has begun, but we have yet to realize the real magnitude of this Internet Holiday season,” said Cameron Meierhoefer, Internet analyst for PC Data Online. “Early signs on this current week indicate that buying activity is picking up significantly, as people realize that Thanksgiving is here.”

PC Data Online in cooperation with Goldman Sachs surveyed 3,019 home-based Internet users during the week of November 12-16.

Comparison of Gift-Spending
Week Ending
Category 11/14/99
Est. Gift Spending
11/7/99
Est. Gift Spending
% Change
Toys $11,731 $9,751 20.3%
Travel $10,056 $4,409 128.1%
Apparel $4,792 $3,458 38.6%
Computer Hardware $3,874 $5,469 -29.2%
Flowers/Cards $3,371 $3,003 12.3%
Music $3,163 $2,360 34.0%
Computer Software $3,001 $3,571 -16.0%
Electronics $2,191 $3,432 -36.2%
Autos $2,062 $932 121.2%
Books $1,779 $2,198 -19.1%
Videos/DVD $1,540 $1,442 6.8%
Food/Groceries $1,075 $602 78.6%
Health & Beauty $799 $780 2.4%
Pet Supplies $753 $219 243.8%
Home and Garden $749 $1,037 -27.8%
Entertainment $473 $2,197 -78.5%
$53,602 $45,774 17.1%
Source: PC Data Online

“Importantly, satisfaction with the online shopping experience continues to increase as 77 percent of those who purchased during the past week reported that the experience exceeded their expectations,” said Anthony Noto, e-tailing analyst at Goldman Sachs. “The satisfaction rating has steadily increased up from 67 percent during the week ending October 31, 1999.”

The shift toward holiday gift-buying online was confirmed by 42 percent of the survey, who indicated they already have started shopping for Christmas. This is up ten percent from a month ago. Twenty-three percent said they planned to begin shopping between now and Thanksgiving, with the remaining 35 percent indicating they would not begin until after Thanksgiving.

The drop in overall spending was reflected in small dips across the board in most of the top categories, Meierhoefer said. The exception was toys, he noted, which saw a 33 percent increase in its buy-rate over last week. The top five categories in sales for the week were computer software, music, books, toys, and health and beauty products.

While online apparel sales seem to be holding their own this holiday season, the long-term forecast for the sector may be less favorable, according to research by The NPD Group, Inc.

NPD predicts that online sellers of apparel should see approximately $600 million in sales this holiday season, a significant jump over last year’s $250 million in online apparel sales. However, a recent survey reveals that only one-third of consumers with Internet access plan to buy apparel online during the next six months.

NPD’s “Apparel E-Commerce Report,” found that nearly half of total Internet users said they never plan to buy clothing online. And the majority of Internet users (61 percent) who have never bought clothing online reported they do not intend to do so in the future. This reluctance was also prevalent even among those with years of experience on the Web; more than 40 percent of these Internet veterans said they’ll avoid buying apparel on the Web.


When Internet Users Say They Will Purchase Apparel Online
Total Have Purchased
Clothing Online
Have Not Purchased
Clothing Online
Next 3 Months 18% 51% 6%
Next 3-6 Months 15% 26% 12%
Next 6-12 Months 14% 14% 15%
Not for at least a year 6% 5% 6%
Never 47% 4% 61%
Source: NPD Online

The study confirmed consumers’ key reservations about purchasing apparel online are difficult to overcome. Topping the list of concerns was the inability to try on merchandise. Eighty-five percent of those polled for the NPD study said they were concerned about not being able to try on before purchasing. Not being able to see items in person was cited as a concern by 78 percent of those polled. Return policies were an issue for 70 percent of respondents.

Consumers most likely to overcome these reservations are those who have purchased apparel on the Web before. One-quarter of Internet users polled had already purchased clothing online. Among those consumers, repeat purchasing expectations were relatively high. More than half planned to buy clothing online again in the near term and nearly all said they would buy again at some point.

“Once consumers buy clothing on the Web they’re very satisfied,” comments Mike Hand, president of NPD Apparel Services. “However, getting them there will be the challenge. Consequently, online marketers need to make it a priority to develop long-term relationships with their customers. Sales from loyal customers will be easier to generate than trying to convert non-online buyers.”

To date, specialty sites carrying only apparel, such as Gap.com or LandsEnd.com, have been most successful. While super sites carrying many product categories, such as QVC.com or Macy’s .com, attract more visitors, specialty sites are winning the lion’s share of sales. Nearly three quarters of consumers polled for the study said they made their most recent online apparel purchase at a specialty site.

Top 5 Web Sites for Apparel
Monthly
Unique Visitors

(000)
Percent Making
Repeat Visit
Average Minutes
Per Visit
Total Apparel Shopping Sites 4,186 24% 5.8
Gap.com 1,092 17% 4.9
LandsEnd.com 996 37% 7.9
EddieBauer.com 572 28% 6.5
VictoriasSecret.com 565 15% 5.8
JCrew.com 547 22% 3.3
Source: Media Metrix July 1999

Among specialty sites, catalog marketers clearly have an advantage. Their experience in nontraditional product display, fulfillment, and customer service via the phone is translating very well to this new medium.

Sales over the Web are not replacing, but rather enhancing, offline business, the survey found. Almost half of online buyers say their most recent purchase of clothing from the Internet was made in addition to purchases made offline.

“At this point in time, the Internet is hardly stealing apparel sales away from traditional stores,” Hand said. “To the contrary, the Internet may be helping the industry grow as a whole, as one of the main reasons for buying clothing online (besides convenience) is because consumers cannot find the items in regular stores.”

NPD’s report is based on information collected online from a sample of 2,399 individuals, representative of the U.S. Web population. The study was conducted in August 1999.

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