Online sales during the 2000 holiday season generally met expectations by more than doubling last year’s levels, according to the latest estimates, but the results may not have been enough to take the pressure off struggling Web retailers.
“There were a lot of online retailers that needed a gangbuster holiday season,” said Seth Geiger, vice president of research at BizRate.com, a comparison shopping site.
“And a lot of their internal projections weren’t projections so much as hopes, and very optimistic ones at that. They had their own Christmas wish lists and customers didn’t deliver,” he added.
At the same time, many brick-and-mortar retailers grew faster than their born-on-the-Web competitors during the Christmas rush.
According to figures released by PC Data and Goldman Sachs, shoppers spent $9.8 billion online between the first week of November and Dec. 24, up from $4.7 billion during the same period in 1999.
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Other numbers show a similar trend. Visa USA reported that its cardholders spent about $3 billion online between Nov. 24 and Dec. 25, compared with $1.5 billion a year earlier. And Yahoo! Inc. said holiday volume through its online shopping site, Yahoo! Shopping, nearly doubled from 1999 levels.
BizRate.com found somewhat slower growth. The company estimated that online shoppers spent more than $6 billion between Nov. 20 and Dec. 26, up 60 percent from $3.75 billion spent online during the same period in 1999.
Still, Geiger called 60 percent growth “an excellent number,” given the general malaise that has hit the retail industry overall as a slowing economy and sinking stock market unnerved consumers. Geiger pointed out that because e-commerce is becoming more mainstream–and the online shopping population is coming to mirror the offline shopping population–the same economic trends affecting the overall retail industry are starting to impact Web merchants.
While most e-tailers won’t release their holiday sales numbers until they release fourth-quarter results, it appears the holidays were a disappointment for many Web-only players that needed to beat expectations.
Online toy store eToys already has warned that its net sales for the final quarter of the year will be between $120 million and $130 million–above the $106.8 million in sales that eToys posted in the final quarter of 1999, but below the $210 million to $240 million that the company was expecting.
EToys also said it is laying off part of its workforce to cut operating costs, that it has only enough cash left to operate through March, and that it has hired Goldman Sachs to explore a merger or sale.
According to PC Data analyst Cameron Meierhoefer, the warning from eToys may be a sign of what is to come from other Web-only merchants, most of which are not yet making money and were counting on big jumps in holiday sales to prove to investors that they deserve more funding.
In the case of eToys, the company was hit by what Nielsen/NetRatings analyst Sean Kaldor called a “perfect storm.” Two of its biggest competitors, Amazon.com and Toysrus.com, teamed up to jointly run an online toy store. And a third competitor, Wal-Mart, got serious about its online sales.
Indeed, Nielsen/NetRatings found that 11 of the 15 most visited e-tailers during the holiday season were offline companies such as BarnesandNoble.com, Walmart.com, JCPenney.com, BestBuy.com, Kmart’s BlueLight.com and Sears.com.