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Shoppers Hit the Bricks – and Clicks

27 Nov, 2002 By: Holly J. Wagner

Shoppers are hitting malls and keyboards early this year, starting their holiday shopping earlier and doing more of it online, a variety of retail analysts reported.

Perhaps the most telling report is from the U.S. Department of Commerce, which reported a 34.3 percent increase in online shopping for the third quarter of this year from last year, and a 7.8 percent increase from the second quarter of this year.

It's no wonder, taking into account the $1.5 billion in online spending that Web site traffic measurement firm comScore Networks logged in the week ending Nov. 17 -- a 28 percent hike from the same week last year.

“E-commerce will continue to outgrow traditional retail, as the Internet appeals to growing numbers of consumers in search of the best deals, convenience and breadth of offerings,” said comScore VP Michelle David Adams. “At the same time, continuing fluctuations in this growth offer a valuable leading indicator of this fragile consumer economy.”

That report held good news for the home video sellthrough industry, as comScore found a whopping 92 percent increase in spending on consumer electronics and a 68 percent increase in movie and video sales online for the week ended Nov. 10. By comparison, online toy spending was up 37 percent and clothing purchases were up 70 percent.

Not surprisingly, Amazon.com was the top online seller in the comScore survey. Also in the top 25 were Columbiahouse.com at No. 6, CDNow.com at No. 7, BestBuy.com at No. 13 and online rentailer Netflix.com at No. 20 -- a more than respectable showing against online sellers.

Whether the online spending trend can continue into next year will likely hinge on how long e-commerce ventures can operate without paying sales tax. Earlier this month, 30 states signed onto a proposal that outlines the basic structure for an Internet sales tax.

Retailers reporting to Shop.org, the online division of the National Retail Federation, confirmed a shopping surge early in November, with 60 percent posting revenue increases of 25 percent or greater in the first two weeks of the month, compared to the same period last year.

Free shipping with conditions has been the most successful tool in driving holiday business, 47 percent of e-tailers reported. Search engine placement, best-seller lists and early shopper discounts have also been effective.

“The 2002 online holiday season is off to a great start,” said Scott Silverman, executive director of Shop.org. “We're encouraged to see retailers reporting online sales increases during these early weeks and expect this trend to continue.”

It remains to be seen whether that will translate into increased spending for the year. Projections for holiday spending range from flat to modest growth, with the most ambitious estimates at 5 percent to 6 percent growth.

Findings last week from analyst firm The Conference Board indicate consumers will spend 5 percent more on the holidays this year than last. “Despite widespread reports that worried consumers will sharply curtail their holiday spending, the board's annual survey projects a 5 percent increase in Christmas spending this year,” said Lynn Franco, director of The Conference Board's Consumer Research Center. “Continued discounting by retailers, both online and in the stores, is likely to prop up Christmas spending.”

Low entry-point pricing is helping consumer electronics and software to a sales surge this year, but computer makers are unlikely to feel the same benefit.

Gartner Dataquest predicts just a 1.5 percent increase in PC sales, even though many are equipped with media center features this year that weren't widely available last year. The PC industry's loss may be the home entertainment industry's gain.

“The gloomy economic situation is likely to affect U.S. and Japan holiday season purchases,” said George Shiffler, principal analyst for Gartner Dataquest's computing platforms and economics research. “Given that home PC penetration is relatively high in the world's developed economies, limited funds may induce users to extend the life of their PCs. Many families may also choose other devices such as game consoles, DVD players and digital cameras instead of upgrading their old PCs.”

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