E-tailers set for first merry Christmas

Analysts predict this could be the first year that consumers seriously consider Christmas shopping online as an alternative to trailing up and down the high street.

Web surfers are expected to set aside any doubts raised by security breaches and dotcom washouts in favour of avoiding overcrowded city centres in the midwinter shopping 'rush hour'. They are likely to buy mainly from trusted brand names, however.

Forrester Research predicts online retail sales in the US will generate $10bn this season and sites will see 16.6 million new shoppers.

But Evie Black Dykema, an analyst at Forrester, said leading online merchants will focus on fundamentals such as customer service and a good product mix. While the shopping experience will be better than last year, however, it won't be good enough to satisfy people next year.

"The focus on the basics - service, performance and product - will yield better results than last year's dotcom obsession with mega-marketing campaigns," said Dykema. "It improves customer experience, and allows blending of online and offline channels."

She advised e-tailers to prepare for next year by synchronising their back-room strategies. "They must co-ordinate returns and inventory management, and align supply and demand via B2B [business-to-business] retail exchanges," she said.

Analyst firm Meta Group also warned e-tailers that they must improve inventory management and delivery to avoid the poor performance that many business-to-consumer (B2C) websites turned in last year.

"E-tailing requires more than a pretty web face," said Meta Group analyst Gene Alvarez. "The ability to get the goods into consumers' hands is what generates earnings and will determine success in this market."

Testing times for e-tailers
Last year, one-in-four retail sites crashed or were inaccessible to customers. The increase in traffic over the Christmas holiday period even forced catalogue store Argos to reject customers so that it could deal with a backlog of orders.

But UK e-tailers have responded to such criticism by claiming that they have been planning for the Christmas rush for months. Letsbuyit.com said it has been testing its site, and signing deals with suppliers and carriers since the summer.

"We have a test environment with reserve servers, are extending our call centre hours, and have signed carrier contracts for 15 times the volume of goods we think we might sell. We have tried to eliminate 'factor x'," said Tracy Mawson, managing director of Letsbuyit UK and Ireland.

And Jupiter Research predicted that online retailing is likely to survive the recent wave of dotcom failures, after surveying 6000 regular European internet users. It appears that an increasing number of them are undertaking ecommerce, while existing shoppers are spending a higher proportion of their income over the internet.

Doubts over online shopping
Dotcom collapses such as Boxman, Dressmart and the consumer operations of Urbanfetch have made the industry sceptical about the future of ecommerce. But Jupiter claimed that problems in the B2C sector have been caused by the consolidation of the market and funding difficulties rather than the failure of the internet retailing concept itself.

Mark Mulligan, an analyst at Jupiter, said there was a trend indicating that the longer consumers use the internet, the more likely they are to shop online. And the longer they have shopped on the web, the more money they are likely to spend.

"These figures show that online consumers are initially more comfortable buying inexpensive items, but graduate on to higher-margin purchases as they become more familiar and confident with online shopping," he said. "It is essential for B2C companies to recognise this long-term lifespan of the online shopper and thus the importance of customer retention."

E-spending habits
Research company Experian surveyed 500,000 consumers about their internet spending habits and found that the number of online shoppers had doubled during the course of this year to £4.7m.

It also found that consumers are starting to buy more frequently. About 1.45 million users made four or more online purchases this year, but the most popular choices come as no surprise - CDs, books, computer games and holidays.

Another research group, consultancy Verdict, even went so far as to claim that the online rush would undermine the traditional retail market. It expected that spending in high-street shops during this year's holidays would be worse than last year's, when raised expectations of a millennium spending boom were dashed.

The report said that, although 1999 was considered to be the first internet Christmas, it proved to be a disaster for companies whose fulfilment systems cracked under the strain. Time lags meant that many online customers had to place orders in November to get deliveries on time.

Verdict calculated that online Christmas sales reached £98m last year and forecasts that this year will see sales of £330m.

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