STICKY HOLIDAY FOR APPAREL?
Byline: Valerie Seckler
NEW YORK — Will online apparel sales strides continue to outpace overall purchasing on the Web in the fast-approaching fourth quarter — or will cybershoppers curtail holiday fashion shopping?
Fresh online sales data for August released last Tuesday by Forrester Research and Greenfield Online shows overall business-to-consumer volume was essentially flat versus July, totaling $4 billion, but apparel sales still managed a 16.9 percent hop for the month, reaching $262 million.
According to a pair of observers, however, it’s too soon to tell if the trend will stick for holiday.
Despite apparel’s encouraging performance on the Web in August, Forrester analyst Christopher Kelley told WWD that “apparel and fashion accessories are two categories expected to be most affected by consumers’ growing uncertainty over their spending plans.” One reason, Kelley said, is that “people are probably more inclined to buy lower-ticket items like CDs and books to give as gifts than a new sweater or pair of pants.”
And, gift-giving aside, fashion goods often represent discretionary purchases rather than necessities, further clouding apparel’s fourth-quarter outlook, the analyst observed. “Even if someone needs a new item like a belt, they can decide to spend $20 on it instead of $40,” Kelley noted, a consideration adding to Forrester’s anticipation of softness in the fashion categories.
A similar note was sounded last week by Retail Forward, a new management consulting, market research and executive development firm based in Columbus, Ohio. The group expects apparel retailers to fare the worst this holiday as they face comparisons to relatively strong demand a year ago; receding consumer demand for apparel this year — particularly for what they termed “readily deferrable, discretionary purchases” — and downward price pressure, even as merchants struggle to tame their inventories.
“We’re coming off an economic boom, and people’s closets and houses are pretty well full,” said Mary Brett Whitfield, a senior vice president at Retail Forward and director of the E-Retail Intelligence Program at the firm, whose management has just agreed to acquire it from PricewaterhouseCoopers. “The terrorist attacks give people one more reason to rethink their spending plans; I do believe it’s put a damper on retail. Apparel will be facing strong comparisons online.”
Making an accurate holiday sales forecast is never a walk in the park. However, this year, it’s especially tricky because it’s so tough to tell how the psychological effects of the terrorist attacks will touch people’s purse strings as the fourth quarter unfolds.
A few factors bode well for e-tailers, potentially giving them a near-term leg up on their earth-bound competitors, Whitfield said. They include:
The Internet’s capacity to facilitate comparison shopping far more easily than can be accomplished by running from store to store, coupled with consumers’ growing value orientation.
Potential shortages of hot items at brick-and-mortar stores, stemming from order cutbacks and cancellations, which could send shoppers hunting for them online. Whether or not they find the goods there, some e-purchases might result from those visits.
The utility of the Internet’s “built-in” communications medium, e-mail.
Overall, Forrester is forecasting purchases made online by U.S. consumers for goods, entertainment and services such as travel will reach $11 billion this holiday, a 10 percent increase over sales of $10 billion notched during holiday 2000, a period the Internet researcher defines as beginning on Thanksgiving and running through New Year’s Day. “In a very poor economy, it is still impressive the Web can grow at this rate,” Kelley claimed. By comparison, holiday purchases made by cybershoppers in the U.S. last year surged twofold over sales of $5 billion in 1999.
Retail Forward’s holiday estimate of $11.5 billion in B2C sales online this holiday is in the same ballpark as Forrester’s forecast, but its prior-year holiday total of $8.9 billion pegs the increase at a headier 30 percent, perhaps because Retail Forward only considers sales of goods, not services.
That growth rate would also be way stronger than the slim 1.5 percent increase Retail Forward is anticipating in total consumer spending — online, catalog and traditional — this holiday, which it defines as Oct. 1-Dec. 31. Such growth, to revenue of $653 billion from $644 billion in 2000, would mark the smallest fourth-quarter increase in consumer spending in 11 years. Retail sales grew only 1.8 percent in holiday 1991, but there was 3 percent retail price inflation during that recessionary period.
With retail prices falling at an annual rate of 1 percent in recent months, plus the bulging supply of goods and flagging consumer demand, Whitfield expects heavy promotions to unfurl during the fourth quarter. The activity already has kicked in online, she noted, with Gap.com offering 20 percent off purchases of $50 and more, and Talbots.com giving shoppers 20-25 percent off some new fall items, rather than waiting ’til late in the season, as it usually does.
“One wild card this holiday will be the impact of new buyers, people looking to shop online for the first time after making charitable donations at Web sites like Yahoo and Amazon,” Kelley projected, referring to the flood of activity following the Sept. 11 terrorist attacks on the U.S.
Consumers’ apparel purchases on the Internet in August tallied $262 million, up from the sector’s sales of $225 million in July, making it the month’s third-fastest growing e-commerce category. Racking up the biggest monthly percentage increase among small-ticket items in August was the tools-and-hardware segment, up 55 percent, to $45 million from $29 million, followed by books, small appliances and garden supplies, which each notched gains of 34 percent.
Asked to assess Internet sales in August, Kelley remarked: “Online shopping made a quick comeback after the big drop in June.” The analyst was referring to B2C sales online that slumped 18 percent in June to $3.2 billion from their May mark of $3.9 billion and were off 20 percent from sales of $4 billion in May 2000. In August, by comparison, sales slid only 4.8 percent from year-ago levels, coming to $4 billion, against $4.2 billion in August 2000. Forrester culls its sales data from the first 5,000 responses it receives from an online panel, developed by Internet researcher Greenfield, during the first nine business days of each month. Those results are then weighted to demographically represent the U.S. population.