Santa's Big Present to Web Retailers

2001 has been a year of surprises for Internet retailers, most of them bad.

Remember eToys? Pets.com? They were the darlings of Christmas 2000, and now

they're long gone. But the final surprise for Net sellers comes in the last

month of 2001 and it's a very pleasant gift. It seems Santa has a full bag of

consumer dollars to spend online.

Holiday retailing is high stakes for Internet companies, $11.86 billion in

North America and $25 billion worldwide according to Gartner Research.

Another research firm, eMarketer, pegs the U.S. fourth-quarter Net spending

at $10.7 billion. However you look at it, online retail sales should be up

about 20 percent this year. Not bad considering overall holiday spending will

be in the low single digits it it's up at all.

Why the bullish projections? For one, consumers are ready to trust Web

retailers again after a couple of years of ragged customers service.

Traditional retailers such as Sears Roebuck, Wal-Mart, JCPenney and The

Spiegel Group have poured millions into the their Web shops over the year,

ensuring they won't experience the site outages and delivery problems that

plagued the early dot coms during Christmas past.

Another driver is the aftermath of September 11. The prevailing belief is

that many consumers will keep away from high-density shopping areas such as

malls. People want to stay closer to home, and Internet shopping provides a

means to buy and ship gifts far from the crowds and postal lines.

Twenty percent growth is quite a feather in the cap during a sustained

downturn that was forced down further by the terrorist attacks. The projected

growth in Net spending comes during a quarter when the overall economy is

actually shrinking. Makes you wonder what the researching have been drinking.

Turns out their projections are close to the mark. Numbers coming in from the

Thanksgiving weekend are very encouraging for Net merchants.

Nielsen/NetRatings Holiday eCommerce Index showed Net shopping on the day

after Thanksgiving up 22 percent over the previous week.

More startling is the increased buying at individual retailers, especially

the major discounters. Kmart led the pack experiencing a whopping 226 percent

increase. Fellow discounter, Target saw a jump of 151 percent, while Wal-Mart

posted a one-week gain of 132 percent.

Even some of the long-term Net merchants saw steep gains in shopping. Yahoo!

experienced a 75 percent increase in sales compared to the same period last

year. Net leader, Amazon.com, likewise spent the weekend in the high-demand

zone. Both companies were thanked with stock price increases. Amazon.com was

up $1.97 to $11.05 on the Monday following Thanksgiving, and Yahoo! gained

$1.50, reaching $17.23.

Part of the reason for this year's increase is that Internet usage is up 15

percent for the year, with a grand total of 115 million U.S. households

connected to the Web, up from 100 million in October 2000. The extra 15

million in the channel is good news for merchants, since newbie Net shoppers

are just forming their buying habits. The rule goes, if you can nab them

early, you can keep your customers for life.

The big shopping weekend didn't see increases in all retail categories.

According to Nielsen/NetRatings, the group that includes books/music/video

was actually down 3 percent, and apparel was dead even. The leading category,

not surprisingly, was toys and games, up 65 percent from the previous week.

Home and garden, a lagging group normally, saw a 40 percent lift. The

hard-hit sectors of computer hardware and consumer electronics were also up,

with 18 percent and 15 percent increases respectively.

Guess what the big toys are this year. Yep, its anything and everything Harry

Potter (I confess I did my share by purchasing the Harry Potter HO train

online for my eight-year-old). Five of the 25 top-selling toys at Amazon.com

were Harry Potter-related products. The new game platforms, Xbox, GameCube

and PlayStation 2, all did healthy business as well. The dot com crash may

have reshuffled the merchants taking the credit card numbers, but it

certainly didn't dampen the spirits of the Net buyers

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