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Will Concerned Consumers Help Boost Online Holiday Sales?

16 Oct, 2001 By: Hive News

With many Americans thinking about hunkering down for the holidays in the face of terrorist threats, more consumers may eschew traveling and malling and buy more of their gifts online this year.

Internet merchants will probably gain sales from former, current and new shoppers alike, mainly because shopping online is perceived as potentially safer and therefore less stressful than going out to a public mall during the ongoing crises.

In the aftermath of the Sept. 11 terrorist attacks and the threat of more to come, e-commerce companies believe concerned consumers will help boost online holiday sales. Even though online spending took a dip immediately after the Sept. 11 attacks, it made a strong recovery, with online sales up 17% the week ended Oct. 8 from the week ended Sept. 10, according to BizRate.com, a research firm that tracks 2,000 online sites.

Retail analysts say thatsales at brick and mortar stores have recovered from the post-event shock that stunned consumers, but still remain slightly below normal because of the recessionary environment that was already affecting stores before the attacks. And no one wants to even contemplate how shopping patterns might be impacted this holiday season by continuing fears or any actual incidents that could push consumers deeper online.

"Families are staying home and the online retailers are benefiting disproportionately," Chuck Davis, c.e.o. of BizRate, told the Associated Press.

Davis told the AP that the Internet should prove even more valuable in these rough economic times, since it allows bargain hunters to comparison shop and save time looking for certain items.

Despite this tenuous edge for online shopping, an overall slump in consumer spending this holiday could negate any advantage online stores might enjoy this year. The industry, still feeling the affects of last year's industry shakeout and this year's slowing economy, may wind up having to deal with the possibility of lowered expectations facing retailers, online and off, this muted holiday season.

In fact, with the germ scare causing additional concerns among the public, some consumers may not want to receive packages in the mail at home or at work, which would hurt online businesses that depend exclusively on the mail delivery to reach customers; other consumers will exercise common caution and pay more attention to the source of incoming mail. Regardless of how some individuals view the mail, it could all make consumers think before buying anything.

BizRate, according to the AP, projects a 31% rise in holiday online sales over a year ago to $6.3 billion, from last year's $4.8 billion. But not every analyst agrees that the nation will turn to online shopping as the antidote to tough times -- or that online shopping is somehow magically immune to the same conditions stifling the general economy.

"My general sense is that the negative economy will have a bigger impact on e-commerce than any benefits," Ken Cassar, a senior analyst at Jupiter Research, told the AP.

Cassar told the AP his early projections indicate a 10% to 20% growth in online holiday sales this year, from last holiday's $10.8 billion. That compares with a 50% jump in last year's holiday business over the prior year's levels, far short of the 70% gain expected then, he said.

"The terrorist attacks have exacerbated the negative retail trends, which have dragged down the entire economy," Cassar told the AP. "And the Internet is being dragged down with it."

Cassar said that free shipping and handling will be the most popular incentive this holiday to draw customers, rather than less-effective product discounts.

Forrester Research Inc., in conjunction with Greenfield Online, reported that total U.S. spending online decreased only slightly from $4.0 billion in August to $3.97 billion in September.

The number of households shopping online increased to 15.2 million in September, from 14.8 million in August. Consumers spent an average of $262 in September, compared with $273 in August.

"The fact that online retail remained stable during a month of such social and economic instability speaks volumes about how well e-commerce is positioned to stand up to a poor economy," said Christopher M. Kelley, analyst at Forrester.

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