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Online shopping rises sharply, but e-retailing challenges remain

Online holiday purchases are rising, research studies by Harris Interactive Inc., U.S. Bancorp Piper Jaffray Inc. and the Boston Consulting Group Inc. show.
A joint study by Harris Interactive and U.S. Bancorp found that U.S. shoppers in November spent an estimated $4.8 billion at online retailers, a 29 percent increase over October’s sales. The size of each transaction also grew by nearly 25 percent, reaching a median of $150 per person.
The number of online shoppers also climbed compared with last year, reaching 49 million.
The joint research by BCG and Harris Interactive found that as of Dec. 11, 40 percent of the online population had purchased a holiday gift electronically. The average shopper bought six gifts online, totaling $234, up from $170 last year.
Other research suggested that online sales during the holiday season, while rising rapidly, failed to meet expectations. Consumers spent $5.29 billion at online sites, excluding travel, from Thanksgiving to Dec. 24, BizRate.com reported. That represents a 57.9 percent increase from a year ago, well short of the projected 80 percent increase.
Among the biggest winners, according to U.S. Bancorp and Harris Interactive, were toy merchants with revenues rising 301 percent to $277 million. Clothing and apparel purveyors reported revenues up 72 percent to $529 million, and electronics retailers saw revenues grow 63 percent to $235 million.
“For the month of November, we have seen online retailers benefiting greatly from the holiday demand,” said Tony Gikas, U.S. Bancorp’s vice president and senior research analyst. “We expect this momentum to continue through the second week of December, but slow down somewhat during the week before Christmas.”
As the holiday approached, Gikas expected a shift away from online retailers toward bricks-and-mortar stores for last-minute gifts. He said they would need to find ways to entice shoppers to continue to buy online with incentives like free express shipping.
In spite of the positive results of the studies, online retailers still face some daunting challenges.
Chief among those are decisions by consumers to avoid online shopping. The BCG study found that although 70 percent of the online population planned to buy online, 27 million-some 22 percent-ultimately opted against it.
“While online retailers have been able to encourage individual consumers to do more holiday shopping online, there are still far too many consumer sitting on the fence,” said Michael Silverstein, BCG’s senior vice president and head of the firm’s consumer practice. “These are consumers who won’t believe in online retailing as a reliable alternative to traditional shopping during the holiday season until they try it for themselves, or a friend or relative convinces them otherwise.”
Consumer satisfaction still poses a problem for sellers with more than one-fifth of those surveyed reporting a purchasing problem, such as receiving an incomplete order, an incorrect order or damaged items. Eleven percent of the gifts ordered online by Dec. 11 were received late.
“Despite nagging problems with delivery, consumer satisfaction remains quite high. Only 3 percent of consumers have expressed a clear dissatisfaction with their online holiday shopping experience,” said Lori Iventosch-James, Harris Interactive’s director of e-commerce research. “Consumers’ expectations are continuing to rise. If online leaders can achieve a level of consistency of service and reliability that leading catalogers have achieved, there will be a boost in volume, confidence and value.”
She explained that too often out-of-stock items, unreliable fulfillment and difficult transaction closing have made novices wary of time-critical purchases.
The boost in online shopping may help both merchants specializing only in e-commerce and clicks-and-mortar operations.
The U.S. Bancorp/Harris Interactive study found that off-line purchases that resulted from online shopping amounted to an estimated $7.3 billion in November, up from $5.2 billion in October.

12/29/00

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