The Hard Lessons Of Holiday ’99

While the next few weeks may not tell the definitive story of electronic shopping, evidence is emerging that early sales projections were rosier than what actually materialized.

According to online research firm Service Metrics, even if holiday sales reach an ambitious $15 billion (US$), they will account for less than 10 percent of total sales. That figure is quite low, considering the tremendous hype surrounding e-commerce and how much time and money has been invested.

The question may be premature, but some e-businesses are already asking, what happened?

Cyber Gridlock?

Much of the problem is sheer traffic. Data from the Virginia-based .Com Group suggests that there will be a possible net loss of $5 to $7 billion in e-commerce over the next four weeks, simply due to Web site and infrastructure glitches. The problems include fulfillment, shipping and inventory control.

Once the dust settles, those e-businesses that remain standing might do well to learn from this holiday season’s downtime, said Simon Rakoff, president of .Com Group. In fact, the most important element for e-tailers to study is what could have been sold, Rakoff said. He added that it is possible that online sales could have doubled predictions if not for lost sales due to inefficient usability.

Some e-tailers are learning the hard way that their rush to get online for the holiday season, when they were not truly ready to handle the masses, may cost them dearly.

Familiarity Breeds Online Spending

Even those sites that physically hold up well throughout the season may suffer some losses due to consumer skepticism. Jupiter Communications reports that 39 percent of online shoppers said they would buy from merchants whose stores or catalogs they had already frequented. Those consumers report a need for “reassurance.”

The medium itself is already new and mysterious. Shoppers evidently do not want to contend with unknown e-tailers and products with no proven track record. So far, brand names win.

Translation: If the e-business has an established brick and mortar counterpart, shoppers are more likely to trust the online version than an online newcomer. That news is music to the ears of powerhouses like Wal-Mart, which experienced one of the biggest leaps in online sales for the last two weeks of November.

Other research indicates that once a shopper has a satisfactory experience with an online retailer, there is a strong likelihood of a return visit and more sales.

E-tailers: Maximize Each Sale

The good news is that there is still time to find success in holiday sales. Jupiter has advised its online merchant clients to concentrate on acquiring new customers through a combination of attractive pricing, including discounts, deals and free offers. Any original promotional steps should be geared toward reinforcing credibility of online brands. The underlying theme of it all should be value and security.

To no one’s surprise, convenience reigns supreme in online shopping. A recent AOL study indicates that 70 percent of e-shoppers shop exclusively from home. However, the study also found that almost half of the respondents researched products online before buying them at local brick and mortar stores.

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