E-BUSINESS
Holiday Sales Show E-Commerce Alive and Well

Like thousands of other online retailers, 2004 was a banner year for PearlParadise.com. And, like thousands of other online retailers, much of the company's success came during the holiday shopping season that many are calling a turning point for e-commerce.

Numbers don't lie. The online pearl purveyor's sales skyrocketed from US$250,000 in December 2003 to just over $1 million in December 2004. PearlParadise.com's average ticket during the month of December jumped $382 to average $624 per transaction.

What's more, the company set a one-day record on December 9 with more than $100,000 in sales . Its highest ticket item sold for $23,250, and sales to Europe increased 50 percent year-over-year to account for nearly 15 percent of total revenue.

Luxury Goods

"What we have noticed this holiday season that is strikingly different than years past is that consumers are much more willing to spend money online, and on luxury goods," Jeremy Shepherd, president of PearlParadise.com, told the E-Commerce Times.

"One factor that seems to account for such a dramatic increase in online sales is trust. Consumers are much more willing to buy product site-unseen. Shopping online has become a way of life for so many consumers," Shepherd said.

PearlParadise.com's experience is no fluke. Jewelry sales jumped 113 percent to $1.9 billion in 2004, compared to the $888 million spent in 2003, according to a holiday eSpending Report from Goldman, Sachs & Co., Harris Interactive (Nasdaq: HPOL), and Nielsen//NetRatings. That marked one of three categories that generated the highest year-over-year growth. Flowers and computer hardware/peripherals were the other two.

In light of the evidence, it would seem that the reports of e-commerce's death were greatly exaggerated. That's the conclusion that many analysts are coming to in the face of a record-breaking 2004 online holiday shopping season that totaled nearly $9 billion -- a whopping 24 percent increase over the year-ago period, according to Nielsen//NetRatings. The overwhelming conclusion: e-commerce is alive and well.

Turning Point

Indeed, many observers said the successes of the 2004 holiday shopping season are not just a spring board, but a full-fledged turning point for e-commerce. Analysts said the dot-com fallout is now behind us and we've come to the point where e-business truly means business.

"Online shopping contributed significantly to overall 2004 holiday sales by attracting customers through a broad product selection," Nielsen//NetRatings senior retail analyst Heather Daugherty said. "Consumers have become accustomed to purchasing online over the years and look to the Internet to find comprehensive product information, competitive prices and easy gift delivery, allowing them to have more time to spend on other holiday activities."

As Daugherty suggested, there was plenty of revenue for online retailers of all kinds in the e-shopping arena. And not just all kinds, but all sizes. It wasn't only Amazon.com (Nasdaq: AMZN) and the other well-known brand names that cashed in during 2004. Even lesser known e-tailers like PearlParadise.com took large deposit envelopes to the bank.

Favored Categories

Online consumers favored spending on apparel/clothing during the holiday shopping season. That category totaled $3.8 billion, or 16 percent of total online revenue, according to Nielsen//NetRatings. The toys/video games category was second, with $2.5 billion, or 11 percent of online revenue. The consumer electronics category rounded out the top three with $2.3 billion, or 10 percent of online revenue.

VeriSign (Nasdaq: VRSN) Vice President of Payment Services Trevor Healy told the E-Commerce Times that one of the best indicators of consumer confidence is not merely the total amount spent, but also the value of the average ticket -- $178 by his estimates.

"Long-gone are the days of CDs and books as the primary driver of online sales," Healy said. "Now that we see these types of numbers, you are getting into the maturity phase of the network. The early adopter phase is definitely over."

Still, despite the monumental data demonstrating the success of online retailers during this past holiday shopping season, and despite reputable analyst firms proclaiming that consumer confidence is stronger than ever, e-commerce still has its critics.

Warning Against Complacency

Thomas Obrey, chief operating officer for PixelMEDIA, told the E-Commerce Times that holidays are merely an event -- not the event. PixelMEDIA provides strategy, design and implementation services for Web and multi-media initiatives for companies like Nokia and Motorola (NYSE: MOT).

"What amazing feature, technology or idea created this 'turning point'?" Obrey asked. "Was there even one? Or was it simply that we've learned enough to know the basics of what consumers want -- simple, accessible and positive in-stock experiences? Or, even further out, is it that we've finally allowed enough time to pass since the dot-com implosion that the poorly designed, poorly funded and poorly stocked experiences are no longer there?"

Those are a lot of questions. Obrey thinks he has the answer. In his view, the holidays are certainly important and the goal is surely to exceed last year's numbers. However, he said, the larger goal is to find a way to take advantage of every holiday or event, not just Christmas. That, he said, can only be accomplished by making continuous improvements to the e-commerce experience.

Proof in the Pocketbook

"A better long-term focus on continued process, usability and overall experience improvements would provide results all year, small, distinct, and calculated improvements -- culminating in a great holiday season," Obrey said. "The moment we start to rely on a specific point in time (and we do) is the exact moment in time we again begin our slide backward. And standing still is sliding backward in a world where we expect everything to move forward."

At the end of the day, most analysts agreed that e-commerce is alive and well and anticipate additional growth in 2005. Consider the insights of Purnendu Ojha, CEO and co-founder of NexTag, one of the fastest growing online comparison shopping sites. NexTag has weathered the past half decade of economic turmoil and dot-com consolidation with sustained growth and three straight years of profitability.

"This holiday season marked a turning point for e-commerce in the sense that the broad base of consumers exhibited a significant increase in its recognition and acceptance of the Web as a viable alternative to traditional brick-and-mortar retail outlets," Ojha told the E-Commerce Times. "The proof is in the dramatic jump in online sales of approximately 25 to 30 percent that was recorded this holiday season."