Online Retailers Ring Up a Merry Christmas

By Gretchen Hyman

Offline retail establishments may be crying foul over the weak economy this holiday season but Internet retailers and outlets struck gold this year with record sales, a strong indication, say Internet retail analysts, that consumers are generally more satisfied with the online shopping experience and will come back for more.

Los Angeles-based e-commerce research firm announced this week that overall online consumer spending reached a staggering $7.92 billion for the months of November and December. This at a time when there were six fewer shopping days per the calendar year than last year.

Online retailers still only account for 2.5 percent of the worldwide retail pie, but even traditional retail stores with a Web presence reported seeing a significant rise in holiday sales compared to past years.

Overall holiday sales exceeded last year’s figures by 23 percent, which according to BizRate, serves as an indicator that the Internet retail industry is gaining ground as more and more consumers turn to online retailers for reduced or free shipping charges and ease-of-use when it comes to last minute and comparison shopping.

The busiest shopping days this year, according to BizRate, were Monday, Dec. 2 and Wednesday, Dec.11, which rang in $366.2 million and $364.6 million in spending. reported its second busiest day on Monday, Dec. 9, when 1.7 million items were ordered, the company said. On Dec. 24, 62,000 gift certificates were ordered worldwide.

Now in its eighth holiday season, Amazon reported that 56 million items were ordered and shipped between Nov. 1 and Dec. 23, 2002, although the actual dollar figures could not be released in-between quarterly earning reports, a spokesperson said.

Microsoft’s MSN network of e-tailers also saw a significant surge in sales this season, with a record $10.7 billion in the fourth quarter and a 50 percent increase in traffic compared with the same period last year.

According to, the most popular online categories this year were computer hardware, which rang in $2,572 million in sales; electronics, which rang in at $1,168.5 million; entertainment, at $964.4 million; apparel, at $763.8 million; and toys and games at $635.6 million.

The most searched-for products within these categories were digital cameras and printers, camcorders, handbags and luggage, and building sets and models. also reported that the number of female online shoppers rose to 60 percent, from 56 percent last year. In 1998, women accounted for only 39 percent of all online holiday transactions.

“Online Shopping thrived as consumers went online, stretched their wallet, and saved time,” said Chuck Davis, president and chief executive officer of “This holiday, the online shopper was very deal-conscious, and the number of special offers made available online really helped fuel the growth.”

Interestingly, the lure of free shipping, which Davis said was responsible for bringing record numbers of consumer to e-tail sites, was not all it was cracked up to be.

In fact, said Davis, many consumers actually paid for the freight.

Out of the 39 percent of purchases this holiday season that were influenced by free shipping deals, only 9.3 percent of orders actually had a ‘no shipping’ charge, said BizRate statistics. In fact, shipping charges actually increased this year by 14.8 percent, compared with last year, despite the free shipping hype. has had a free shipping program in effect for some time now, said a spokesperson, with a minimum spending level and only on certain “qualified” items.

Orders placed before December 12 were eligible for Amazon’s Super Saver Shipping Offer, which Amazon used to spur last minute shoppers into a record number of holiday sales.

“People were clearly taking advantage of the free shipping offer,” said Amazon’s Bill Curry. “The day before the Super Shipping offer expired was our second busiest day.”

Amazon’s most popular items this year were videos and DVDs, books, wireless phones, and DVD players, the company said.

MSN also reported that more shoppers than ever used its network services to drum up gift ideas, including its gift concierge service that represents hundreds of affiliate merchants like Circuit City Stores, Neiman Marcus, Dell, and J.C. Penny.

“This season, online shopping has become an even more valuable service for holiday shoppers than ever before,” said Jim Barr, general manager of commerce services for MSN.

However, according to a study released by ForeSee Results this week, customer satisfaction ratings came in just slightly below last year, suggesting that online retailers still have a long way to go from a consumer experience standpoint.

In an overall industry rating of e-tailer performance, user satisfaction, browsing capability, privacy, and ease-of-returns policies, ForeSee Results determined that online retailers only scored 69 out of a possible 100 points when it came to customer satisfaction and loyalty.

And while 59 percent of online shoppers said they were highly satisfied with their experience, and 71 percent said they are very likely to do their holiday shopping online next year, 10 percent of those polled in the survey reported being extremely unsatisfied with their online experience this year.

A number that, according to Foresee CEO Larry Freed, is nothing to sneeze at.

However, Freed said, if e-retailers improve a few key elements such as product browsing and ordering capability, the 2003 holiday season is theirs for the taking.

“The 10% of online shoppers that were extremely unsatisfied with their online experience this year presents the industry with a classic opportunity,” said Freed.

“In a soft economy, retail websites are going to have to work a lot harder to satisfy shoppers and convert positive experiences into online and offline sales,” Freed continued. “They need to understand how satisfied their customers are, and how users’ online experience today will impact what they do on e-commerce sites and stores in the future. Satisfying customers is the critical success factor for future online retailing success.”

Small Business Computing Staff
Small Business Computing Staff
Small Business Computing addresses the technology needs of small businesses, which are defined as businesses with fewer than 500 employees and/or less than $7 million in annual sales.

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