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DVD Helps Drive Online Holiday Sales Growth

18 Jan, 2002 By: Joan Villa

Was it a happy holiday for online retailers? Like everything else online, it depends who you ask.

Web sales were up this year over last and outpaced flat or lackluster growth in traditional retail, according to retail analyst Richard Giss at Deloitte & Touche, which surveyed 20,000 U.S. households on purchasing habits over the holidays.

"Overall the holiday season was probably flat to up 1 percent, while online retailers will probably see a 10 percent increase over the prior year," Giss noted. "It's demonstrating more people are becoming more comfortable shopping online, they have fewer concerns about the security of the transaction and greater confidence that the product will be delivered on time."

DVD was a popular gift choice for the November-December sales season. In the Deloitte research, 29 percent of respondents said they purchased at least one DVD online and 58 percent said they shopped for some portion of their overall holiday gifts on the Web. Online shopping was cited for saving time, avoiding traffic and providing better price and selection, Giss said.

Forrester Research, in conjunction with Greenfield Online, reported 16.8 million consumers shopped online in November, spending $4.9 billion. Forrester's unreleased December results show 2001 overall, and the holiday season in particular, fell below 2000, but neither was as bad as some people feared when sales began slipping last summer, according to analyst Christopher M. Kelley.

"After September we saw that online sales were not immune to post Sept. 11 and the sluggish economy," he explained.

Even in that environment, however, video fared well, with unit sales inching up 5 percent in December 2001 over the previous year, he said, receiving a boost from video's "relatively low purchase price" and the "cocooning effect" after the Sept. 11 attacks.

"Given the way the economy went this year and the way retail sales went, a 5 percent growth at least online is relatively good," he added. "Other categories did not fare as well."

Jupiter Media Metrix released perhaps the most optimistic numbers for the holiday, reporting a 50 percent increase in "unique visits" to shopping sites—up to 51.3 million visitors each week —from Nov. 25 through Dec. 23.

The sites that benefited most were "traditional retailers over their pure-play counterparts" noted Ken Cassar, Jupiter Research senior analyst. Ebay and Amazon.com took the top two online slots, but traditional retailers performed strongly, including Columbia House sites in the No. 7 slot with 598,000 visits, Toys "R" Us ranked No. 10 with 515,000 visits, Barnesandnoble.com, No. 11 with 447,000 visits, Walmart.com at No. 12 with 434,000 visits, and Bestbuy.com ranked No. 13 with 416,000 visits.

Alexander & Associates research director Greg Durkin saw the same phenomenon in his company's online analysis of the 13-week holiday period ending Jan. 1. The top sites for DVD sales were Amazon.com and Columbia House, which took over the No. 2 spot from last year's Buy.com, he said. Columbia House, a consumer-direct continuity program, was offering four DVDs for 49 cents each plus shipping and handling, with a commitment to buy four more movies on DVD at "regular club prices" over the next two years, he noted.

"Columbia House gained market share up to 22 percent this year and that came directly from Amazon," which last year measured a 54 percent share, he said. However, overall "most of the growth in DVD sales occurred in brick-and-mortar and mail order as opposed to online."

On the DVD side, market sales were up 166 percent in the fourth quarter 2001 over the year-ago period, while traditional retail climbed 174 percent, mail order spiked 159 percent and Web sales grew only 23 percent, he said.

"There was a lot of hype about how the Internet was going to take over and ruin brick-and-mortar but that thesis has never been proven," he said.

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