Q4 Still the Big Payoff for E-Commerce

Gone are the days of more than 100 percent growth rates for holiday e-commerce, according to eMarketer, but the fourth quarter is still do-or-die time for online merchants.

eMarketer predicts that US consumers will spend $12.5 billion online during this year’s fourth quarter holiday season, a 71 percent increase from 1999’s holiday total of $7.3 billion. Total annual US consumer e-commerce revenues are projected to rise to $37 billion by the end of 2000.

“A 71 percent boost over last year is certainly respectable, but we are done seeing growth rates in the 100 to 200 percent range,” said eMarketer Statsmaster Geoffrey Ramsey.

During the fourth quarter, 5.8 million Internet users will make their very first purchase over the Net. As a group, these buyers will represent 13 percent of the nearly 45 million online buyers in the fourth quarter. Online shoppers will spend, on average, $280 each online, according to eMarketer. That’s slightly more than one-fifth of their total holiday spending. In 1999, the average online expenditure was $215. Experienced shoppers will push this average up in 2000, while new buyers (“newbies”) will push it down.

“These newbies will be enticed to buy online for the convenience advantages of the Web — like not having to deal with crowds, traffic, and long lines,” Ramsey said. “Also, there’s a lot of pressure not to be the last person in America to purchase over the Web.”

Experienced buyers will return to the Web in droves as the holidays approach, and most will increase their spending. Despite some much-publicized problems with problems with service and delivery in 1999, eMarketer says 78 percent of the holiday shoppers in 1999 were generally satisfied with their online experience. Even the victims of the most horrific online tales may have vowed never to return to the offending site, but they haven’t given up altogether on the Web. The biggest problems experienced last year were out-of-stock merchandise; late (or no) delivery; poor Web site performance; and outrageous or disguised shipping rates.

“Remembering last year, e-tailers are determined to avoid making the same mistakes as they prepare for this holiday shopping season,” Ramsey said. “E-merchants are learning from companies like Amazon and the top multi-channel sellers how to use tools that keep customers informed and happy, rather than employing technology for technology’s sake.”

Total online and offline retail sales in the US for the fourth quarter are predicted to reach $858 billion. The $12.5 billion in online sales predicted account for 1.5 percent of this total.

“Clearly, the Web has a long way to go before it captures a significant portion of the total retail pie,” Ramsey said.

As far as the Web has to go to capture a significant share of spending in the US, it has to go even further in the rest of the world. When it comes to e-commerce, the United States is far outspending any other country in the world. According to the Worldwide Internet Commerce Spending Market Map from International Data Corp. (IDC), the US spent $80.5 billion on e-commerce during 1999. Japan was a distant second at $13.5 billion, and no other country comes close to spending $10 billion.

“The United States is spending almost six times as much as the next biggest e-commerce spender — Japan,” said Lloyd Cohen, Director of Worldwide Market Analysis for IDC’s Commercial Systems and Server research. “Part of the reason for the large discrepancy can be attributed to the fact that the United States has the most advanced IT structure in the world.”

In 1999, the US spent close to $385 billion on IT, accounting for more than 46 percent of worldwide IT spending. Japan is second in overall IT spending, with close to $90 billion.

IDC’s map also shows that at 43.8 million, more PCs shipped to the United States than any other country in 1999. In comparison, 4.8 million PCs were shipped to China, the most populous country in the world, and 10.6 million shipped in Japan.