by CIO Staff

Online Shopping Expects 25 Percent Jump

News
Oct 31, 20054 mins
BPM Systems

Consumers are expected to spend approximately 25 percent more online this holiday season than they did last year, several analysts said.

In fact, more than half of the 1,000 shoppers surveyed by MyPoints.com, a Web site for frequent shoppers, said they plan to do at least 54 percent of their shopping online this year. MyPoints members expect to buy everything from apparel, books and magazines to home electronics and even gourmet food and beverages online this holiday season.

“Overall, we expect online holiday shopping to be up more than 25 percent over last year,” said David Rosen, MyPoints’ senior vice president for marketing.

According to the survey, an equal percentage of women and men agreed that shopping online has made them happier shoppers. Some 29 percent of the women and 34 percent of the men said the single biggest benefit of shopping online is finding the best prices. Another 23 percent of the women and 24 percent of the men cited the efficiency of online shopping as the biggest benefit. Jeffrey Grau, senior analyst at eMarketer Inc., said in a statement that he’s confident this holiday season will be a bright one for online retailers, despite high oil prices, a negative personal savings rate, declining consumer confidence and the uncertain long-term impact of hurricanes Katrina and Rita. Online retail sales for the fourth quarter of this year will be US$26.2 billion, up 21.9 percent over last year, according to a survey by eMarketer. Much of the gain is coming as shoppers continue to migrate online from brick-and-mortar stores.

“Several factors are behind this growth — a longer shopping season on the Internet; improved order fulfillment, which allows shoppers to make purchases nearly until Christmas; and intense competition among online retailers, which leads to aggressive promotions — all benefiting the deal-seeking consumer,” Grau said in the statement.

High gasoline prices and bad weather may even tempt more shoppers to do more holiday shopping online this year, he said.

In a report released Monday, Forrester Research Inc. analyst Carrie Johnson said online sales will rise by 25 percent to $18 billion between Thanksgiving and Christmas. However, the Web is not insulated from off-line concerns like rising gas prices, she said in the report. That means if off-line retailers suffer, so will their online counterparts.

“If consumers are worried about paying $50 for gas, they’re not going to jump online to spend their hearts out,” Johnson said in the report.

However, online retailers are expected to benefit from new shoppers this year. “Three and a half million new households began shopping online in 2004, and we’re expecting another 2.5 million to join them in 2005,” Johnson said.

In addition, free shipping offers could drive up the average size of online orders this season, she said.

Despite the cheery new, Johnson said the first quarter of 2006 isn’t looking as good for online retailers. “Although Q4 looks OK, the trends that both bolster and keep online sales at bay in Q4 will converge to negatively affect online sales in Q1,” Johnson said in the report.

One reason for the shift is that consumers will likely buy gift cards online in the fourth quarter but redeem them by actually going to stores in the first quarter, rather than using them online, she said. In addition, while free shipping will draw many shoppers to the Web, many retailers may not meet delivery expectations, driving consumers away from additional online purchases. And finally, because consumers are expected to spend an average of $700 more this winter to heat their homes — in addition to paying higher gasoline prices — they will not have as much money to spend online after the holidays.

By Linda Rosencrance, Computerworld