Forrester Lowers E-Holiday Forecast to $8 Billion

Raising the possibility that online holiday sales may not grow at all this year, Forrester Research (Nasdaq: FORR) said Thursday that it has cut its estimate for spending during the holiday season to US$8 billion.

That figure would actually represent a decrease compared to 2000 levels, when Forrester estimated that $10 billion was spent by online consumers in the U.S.

"The recession, warm weather and deep promotions that drive consumers into stores are taking a toll on online sales," said Forrester analyst Carrie A. Johnson.

Even a weak holiday season would probably leave room for annual e-commerce growth, however. Forrester's data show that for the first five months of 2001, monthly sales were running above 2000 levels, though they have been at or slightly below last year's rates since then.

Gains Still Possible

Web research firm Nielsen//NetRatings (Nasdaq: NTRT) has yet to formally modify its own $10 billion forecast, spokesman Anthony Loredo told the E-Commerce Times Friday. That firm said November sales were up 10 percent over a year ago, and that there is a chance that the "online retail industry could still achieve sales gains for the holiday 2001 shopping period if the momentum from early December continues."

Cambridge, Massachusetts-based Forrester had originally predicted an $11 billion holiday, which would have represented a modest 10 percent increase. Johnson said that figure was itself a "low-ball estimate."

Even after the September 11th terrorist attacks on New York and Washington sparked widespread fears of plunging consumer confidence, Forrester stuck by its forecast.

Keeping the Faith

At the time, Forrester's Johnson said online sales would benefit from the peace of mind that shopping from home provided and from an influx of new shoppers making their first online purchases after becoming comfortable with the Web.

But Johnson said that while e-commerce saw month-to-month growth in November, when nearly $5 billion was spent, a comparison with last year's $6.4 billion showed that a strong season is unlikely.

Citing figures showing that $4 billion was spent between the Friday after Thanksgiving and December 9th, Johnson noted that online shoppers would have to spend nearly twice that amount in the final three weeks of the year to hit the forecast levels.

Glimmers of Hope

Meanwhile, statistics about online traffic may offer some hope that shoppers will remain active. On Thursday, Jupiter Media Metrix (Nasdaq: JMXI) said that traffic levels to online stores were running 55 percent ahead of 2000 levels.

Those numbers may show that online shoppers are willing to buy closer to Christmas than in past years, when shipping woes left many orders unfilled.

Brick-by-Brick

One major factor in the spending shortfall seen so far, Johnson said, is that offline stores are themselves scrambling to attract buyers in what is an even more dismal season for traditional retailers.

"Offline sales are down so much that retailers have resorted to Crazy Eddie-type pre-holiday sales," she said, citing a Gap coupon for 30 percent off on all in-store items.

"Coupons like those … are the Grinch that stole Christmas from online stores. Deep in-store discounts are irresistible to even the most active online shopper."