Byline: Peter Braunstein

NEW YORK — E-commerce 2000 was caught in the cross-hairs of relentless media coverage, as e-tail players found themselves transformed in the public eye from heros to zeros with every downward slump of the Nasdaq. Yet by realizing steady growth over holiday 1999 numbers, e-commerce’s seasonal performance must have disappointed media extremists who were ready to declare the sector down for the count.
Among online consumers, the trend was to kick off the holiday shopping season early and in record numbers. According to Media Metrix, the banner online shopping weeks were those ending Nov. 26 and Dec. 3, which boasted 35.2 million and 35.6 million unique visitors to online shopping sites, respectively. The subsequent pre-Christmas period saw gradual decreases in traffic: 34.9 million unique visitors in week three, ending Dec. 10; 33.7 million in week four, ending Dec. 17. E-commerce during the final holiday shopping week, ending Dec. 24, bottomed out at 31.7 million.
Compared to 1999 holiday traffic, however, the season was a bountiful one for online retail. During the first holiday shopping week, traffic was up 40.3 percent over 1999 figures; during week two, traffic exceeded 1999 numbers by 31.2 percent. Even in the final shopping week, when consumers supposedly evaded the Internet, traffic was up by 28.4 percent over the year before.
“[In 1999] online shoppers increasingly flocked to retail sites through the final days of the holiday season,” said Media Metrix analyst Anne Rickert. “This year online shopping is up, but many who might have been disappointed with or fearful of late-arriving goods last year appear to have shopped earlier.” But, given that online shopping increased substantially over 1999 figures even during the final days of the holiday season, it’s clear that last-minute shoppers did not necessarily rule out the Web. “Online shoppers flocked to sites offering last-minute gift-giving alternatives such as online holiday cards and online gift currency,” said Rickert. “Flooz.com [an online gift certificate site], AmericanGreetings.com, Egreetings.com, and Hallmark.com were among [Christmas] week’s top 10 sites with the largest increases in traffic.” Despite the sluggish Nasdaq, the idea of Christmas shopping without leaving one’s home may have an irreversible appeal for many Americans.
According to research conducted by investment bank Goldman Sachs and research firm PC Data, online spending more than doubled during the peak holiday shopping period. The joint study, which tracked spending from the first week in November until December 17, placed total Internet holiday spending at $8.7 billion, up 108 percent from the $4.2 billion online shoppers spent during the same period in 1999. In terms of drawing the heaviest online traffic, click and mortars predominated. In the Nielsen/NetRatings survey of the top 15 holiday season e-tailers, ranked by total shopping visits between Nov. 5 and Dec. 24, the combined amazon.com/Toys R Us led the pack with close to 123 million visits. Walmart.com ranked number 6 with 18 million visits; jcpenney.com number 9 with 14.4 million; bluelight.com was 12th with 12.2 million; and sears.com and target.com rounded out the pack at number 14 and 15 respectively, with 11.1 million visitors each. One Internet shopping portal that thrived during the holiday season was America Online, which announced that online retail sales to AOL members at Shop@AOL reached $4.6 billion during the 2000 holiday season, while AOL members’ total online spending over the entire year reached $20 billion — double the amount spent in 1999.
Clothing and accessories were the leading shopping category on AOL in terms of sales, followed by: toys and games; books, movies, and music; and electronics and photo. Flush from a record season, AOL executives kicked sand in the face of their off-line retail rivals in a fit of bragging reminiscent of e-commerce hubris circa 1999. “While some off-line retailers have experienced a slower holiday shopping season, at AOL we’re continuing to see tremendous growth,” said vice president of e-commerce Patrick Gates. “For instance, we know that many online consumers shop between the hours of 7 and 10 p.m. — a time when many off-line retailers are closed.” Rubbing salt in the wound, AOL president and chief operating officer Bob Pittman mused: “It’s clearer than ever that online shopping is growing by leaps and bounds in a period where analyst estimates were that brick-and-mortar sales for the holiday period will increase only 2 to 2.5 percent.”
Smaller e-tailers also boasted notable holiday 2000 gains albeit against small base numbers in many cases. Indie fashion site Girlshop.com, for instance, cited a roughly 60 percent increase in sales for the fourth quarter versus the year before. Gross sales for the year 2000 totaled $1.5 million, versus $964,000 for 1999, with an average order size of $118. Yet for all the steady growth, Girlshop ceo Laura Eisman claimed that investors are scarce even for profitable Net enterprises in the current backlash climate. “The fact is that tiny and mid-sized companies aren’t really attracting money anymore, no matter what the circumstances are,” said Eisman. “So we had two choices: going out of business for lack of financing, or becoming self-sufficient. We went for the latter option. We would love more investment capital, but we can survive without it. We’re streamlined, we’re growing, and we’re waiting for the market to shift and for investors to look at companies as individuals and not as part of some floundering B2C sector.”
Indeed, despite a robust holiday season, online retail continues to be treated like a three-time felon in media accounts. The Los Angeles Times, for instance, sustained a drumbeat of doom regarding e-tail during the recent holiday season. With articles entitled “Surviving the Web’s Holiday Shopping Season” and pronouncements like “the honeymoon is over for online retail,” the Times fed readers a steady diet of stories about cruel fulfillment mishaps and customer service nightmares. Meanwhile, CNN Moneyline ran a five-part series in December entitled “The Dot-Com Crash,” which meticulously crafted a mythology of failure surrounding dot-com business enterprises.
Some commentators feel that the media’s fixation on e-commerce horror stories has completely eclipsed the gains many click and mortars and pure plays are making in the retail sector, just as too much media hype a year ago impaired, in these same circles, cogent scrutiny of what is now being called ‘the dot-com bubble’. “It’s ironic to see continually strong online sales growth even while Wall Street is ruining the sector and the press is presiding over the dead body,” Ken Cassar, analyst at Jupiter Communications, told WWD. “The best thing that can happen to online retail is for the press to ignore it. They’re like fight promoters — they built it up, and now they’re taking it down.”
Jupiter has a sanguine forecast for the 2001 online retail sector, anticipating $36 billion in sales versus $24 billion in 2000, a 50 percent increase. Within that overall prognosis, Jupiter is expecting online apparel sales to fare slightly above par, rising to $3.7 billion in 2001 versus $2.4 billion — a growth rate of 54 percent.
The e-commerce landscape is, in short, a hodgepodge of paradoxes. Many e-tailers are thriving even while the e-tail sector has become a media black sheep. Public perceptions of e-commerce are similarly schizophrenic. Amidst news that 210 Internet companies closed in 2000 and the ranks of dot-com unemployed increased to 10,500 in December, one would think that aspiring entrepreneurs would avoid the Internet like the plague. Yet, according to a study by Wired.com, e-business programs at major universities are booming. Enrollment at MIT’s Intro to E-Business section, for instance, is brisk, with over half of the current class (about 200 students) bidding to take it. “The number of people who expect to get rich quick has shrunk,” said Charlie Fine, co-director of the e-business MBA track at MIT. “Dot-coms are dead, but e-business is here to stay.”

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