More Web Shopping Is What's in Store
Tuesday, December 7, 2004; 10:10 AM
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"Categories showing the highest growth in holiday spending last month included toys/video games, video/DVDs and music. The toys/video games category grew 43 percent over last year, while the video/DVDs and music categories increased 39 percent and 32 percent," Reuters said in a near-verbatim pick-up of the survey's canned release.
• Reuters via washingtonpost.com: Online Sales Jump In November (Registration required)
Another dispatch from the wire service in advance of the holiday rush gave a rosy forecast: "U.S. consumers are expected to spend $16.7 billion online during the holiday months of November and December, an increase of 29 percent from the year-earlier period, according to research firm eMarketer," the article said. And the Monday after Thanksgiving, Reuters picked up on yet another survey of brisk online sales. "Thanksgiving online spending doubled this year to $133 million and Black Friday sales were up 41 percent to $250 million, said comScore, which has forecast 2004 holiday sales from November and December rising as much as 26 percent year-over-year to $15.5 billion."
From Clicks to Bricks
The online traffic and sales surge, however, has not equated to across-the-board pay dirt for big-box retailers and department stores. Target, Wal-Mart, Sears and others have had to focus on selling tech goods -- and cutting prices of some hot items -- to help boost disappointing overall sales.
"Some chains staged successful promotional events in late November as they slashed prices aggressively on wool overcoats, digital cameras and flat-screen televisions. Even so, the forecasts that retailers gave for the crucial month of December were mixed," the Wall Street Journal reported Friday. Tech seemed to be the small silver lining in a lot of other tepid retail news, such as this nugget from the same article: "Although video game sales have been reported healthy at Wal-Mart and specialty chains amid the release of a few new titles, such as Microsoft Corp.'s 'Halo 2', there aren't many hot new toys to fuel a big season this year, analysts say."
• The Wall Street Journal: Cash Registers in November Weren't Slow Only at Wal-Mart (Subscription required)
The Los Angeles Times on Friday penned its own piece saying weak in-store sales might be a further indication that people are flocking online to purchase goods. "Sales at stores open for at least one year, a key industry indicator, rose just 1.7 percent, compared with 3.7 percent in November 2003, according to a survey whose results were released Thursday. And of the 71 retail chains surveyed, 45 percent reported sales declines," the Times said. "Instead of shopping steadily through the month in a way that builds momentum, he said, people bought in surges spurred by sales, and that made for little 'follow-through' spending. What's more, he said, bricks-and-mortar stores may have lost revenues as more Americans shopped on the Internet." It isn't surprising then that J.C. Penney Co. is among the traditional stores running a TV ad campaign to lure people to its Web site, while Nordstrom, which has stores in just 27 states, is hawking its gift cards in national print ads.
• The Los Angeles Times: Early Holiday Sales Weak (Registration required)
Put Your Initials Here
Another reason that shopping online might have a leg up on shopping en vivo is consumers' ability to personalize Web-bought gifts. Business Week recently ran an article on the run-up in sales for specialized goods, including sites that sell everything from cookies imprinted with digital pictures to custom-fit clothing from Lands' End.
"Today inscribing initials on luggage or towels seems quaintly old-fashioned compared to what's available on the Web. Thanks to improvements in software that display customized goods online, guide users through the selection process, and automate production, individualizing a gift has gotten far more sophisticated -- and, dare we say, trendy -- this holiday season," the article said. "Of course, not much of this is new except for the variety of choices. Custom-made products have been around forever. ... What's changed is that, thanks to the Web, a broader variety of custom products have become more accessible and affordable. For many goods, the extra fee is only $10 to $20, and delivery time is usually up to four weeks. In the past, custom was necessarily a high-end item. Not anymore. At Target you can order custom jeans for about $35. That's about 50 percent higher than the $23 off-the-rack price, but still hardly a painful premium."
• Business Week: Web Retailing Gets Really Personal
Another boost for online sales? More people are looking online to buy luxury goods, from diamonds to cars (eBay is a hot spot, for example, for buying autos). The New York Times today has a piece on the trend, which has even affected how Tiffany & Co. and other high-end companies do business: "Today, in fact, the most persistent sound in luxury shopping is the mouse click. From now until the end of the holidays, Tiffany.com will receive 100,000 hits a day, roughly equal to the number of people who will visit a Tiffany store," the Times reported. "If mass retailing has been transformed by the availability of better-designed products, like Michael Graves teapots at Target, class has been transformed by technology and a consumer who is as well informed as she is impatient to have the latest gaud. Half the purchases on Neiman Marcus's Web site are by customers who do not live near one of its actual stores, said Brendan Hoffman, chief executive of Neiman Marcus Direct, which also operates the Web site of Bergdorf Goodman, a Neiman property. Designers who travel the trunk-show circuit, selling their new clothes like Fuller brushes, have long known about the wealth in this country. But the Web has given merchants an unlimited portal to the rich, and changed the meaning of notions like status and exclusivity. 'We're selling Chloé, Manolo Blahnik, Dolce & Gabbana,' Mr. Hoffman said. 'We see no price resistance on the Web.'"
• The New York Times: It's Not Exclusive, but It's Lucrative: Why Luxe Went Online (Registration required)
Online Sales = Madison Avenue's Glee
The growth in online sales means Web advertising is getting a boost (lest we forget that ads are what make the sales world go 'round, even for Web sites). Last week the New York Times reported on the spurt in Internet advertising mergers and acquisitions, with the latest deal involved Web video company Viewpoint scooping up Web site ad company Unicast Communications for $7.4 million. "The deal follows other mergers and acquisitions by both small and large companies vying to become one-stop Web shops for advertisers, more of whom are getting online in a big way. Also this year, for example, America Online paid $435 million for Advertising.com in Baltimore, which sells ads on a network of Web sites. And Digitas in Boston, the interactive and direct marketing agency, bought Modem Media in Norwalk, Conn., in a stock transaction valued at about $200 million. Much of this activity reflects the growing confidence in Web advertising, which climbed sharply this year on the strength of keyword search advertising and rich media ads enabled by faster broadband connections. Marketers spent $5.6 billion to advertise online in the first nine months of this year, up 25.8 percent from the period in 2003, according to TNS Media Intelligence, which tracks ad spending. That is a faster rate of growth than TNS found in any other media category."
• The New York Times: More Evidence That Internet Marketing Is Hot Again (Registration required)
And advertisements wouldn't work if Americans didn't want to buy things. The New York Times yesterday ran a compelling piece about the nation's appetite for consumption -- no, not for soda and Big Macs, but for retail goods and products. This is music to retailers' ears in the thick of the holiday season, but should serve as a cautionary tale for debt-laden consumers. An expert: "That postwar surge in consumption, a pent-up response to years of unemployment, then rationing, subsided in the early 1950s. Not until the late-1980s did the nation -- encouraged by market bubbles -- once again devote three-quarters of its national income to consumer spending. But this time, the pent-up demand has intensified rather than dissipated, and the global economy trembles from the stress. The sequence is intricate. As consumption has risen in America, absorbing 80 percent of national income now, the production of goods and services has migrated overseas. That is the polar opposite of the post-World War II experience. Then, Americans consumed what they also produced; income from production paid for consumption. Today, in contrast, 21 percent of what consumers purchase comes from abroad, and the figure has risen by a percentage point every two years since 1990, according to Commerce Department data. The figures do not include gasoline or fuel oil. The imports are purchased on credit -- consumer credit -- and therein lies the stress," the article said. (The article's headline is one of the more interesting and telling sentiments of the piece, "We Pledge Allegiance to the Mall.")
• The New York Times: We Pledge Allegiance to the Mall (Registration required)
When Online Shopping Goes Dark
One big lure of online shopping is the fact that Internet stores never close (and that means no waiting in line at the horrendous hour of 5 a.m. on a sale day). But when a Web site stalls or doesn't work, that can mean oodles of lost sales for retailers. Even online retailing king Amazon.com is not immune to site glitches. "Visitors to Amazon.com's Web site experienced unexpected delays Monday morning and at times couldn't access the site at all. Throughout the morning Pacific time, visitors to Amazon's site were sometimes greeted with a 'Service Unavailable' message, and sometimes a 'We're sorry' note. While an Amazon representative said the issues had been resolved by afternoon, as of 2 p.m. PST, attempts to access Amazon were met with an unavailability message. The site appeared live again at 2:30, however," CNET's News.com reported.
Amazon was mum on the cause of the problem and gave no word on whether it dented the retailers' already brisk sales. If anything, it just bruised the company's mammoth ego. "It's never a good time for a large online brand to have problems," Roopak Patel, a senior Internet analyst at Keynote Systems Inc., told the Associated Press. "Amazon customers tend to be extremely loyal, so it's hard to tell what impact this might have."
• CNET's News.com: Amazon.com Hit With Outages
• Associated Press via The San Jose Mercury News: Amazon.com Experiences Sporadic Outage (Registration required)
All iPod, All the Time
Most of the holiday gift guides have plugged MP3 players as the must-have item, with Apple's iPod at the top of the list (See my Filter from Friday for a review of some guides). Not only are the iPods themselves selling like hotcakes, but the accessories are popular too, according to a dispatch yesterday from the San Francisco Chronicle: "The booming business has spawned a burgeoning accessories market of add-on products that range in price from less than $20 for a plastic case for the iPod to more than $300 for a snowboarding jacket tailored for the iPod user. The selection of add-ons is wide-ranging. They include cables to connect the music player to the home stereo, external speakers, FM transmitters that connect to the iPod's headphone jack and send music wirelessly to the car radio, and battery chargers that plug into cigarette lighters in a car."
"We think the accessories market is worth more than $200 million" a year, Brian Van Harlingen, senior technology manager at tech accessory firm Belkin Corp., told the paper. That quote is a bit self-serving, but the point is valid that accessories for tech gadgets are smoking.
• The San Francisco Chronicle: Peripherals for the iPod
A Yahoo PC?
Dell and other consumer electronics retailers have some new competition this holiday season from ... a search engine company. Yahoo wants a piece of the market and yesterday "unveiled a branded line of consumer electronics products for sale on its Web site, raising the profile on a quiet initiative aimed at bringing its name out of the study and into the living room. The products, which include DVD players and home theater systems, are manufactured by Diamond Electronics," CNET's News.com explained. "Although Yahoo has licensed its brand in the past to consumer products, this is the first time it has lent its name to home electronics. The company previously put its name on PC-related products such as eyeglasses for computer users, digital cameras and keyboards."
• CNET's News.com: Yahoo Puts Its Mark on Consumer Electronics
In other Yahoo news, the company is branching out to additional consumer technology-oriented services. "Yahoo Inc. said Monday that it had acquired WUF Networks Inc., a small start-up whose technology aims to let consumers move their songs, photos and other digital content from their computers to devices such as mobile phones. The deal underscores Yahoo's strategy of trying to make its dozens of services -- including digital music, instant messaging and streaming video -- more widely available not just on personal computers but also on any device connected to the Internet." the Los Angeles Times reported.
• The Los Angeles Times: Yahoo Aims to Move Beyond PC With Deal (Registration required)