Meet the Street: Online Retailers Look for Cheer This Holiday Shopping Season

Despite the state of the economy and uncertainty in the aftermath of Sept. 11, online retailers still should post solid gains in both traffic and sales this holiday season, says Sean Kaldor, vice president of e-commerce for traffic analysis firm NetRatings.

Sean Kaldor Vice President, NetRatings

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Kaldor, the company's lead e-commerce strategist, says the category still has lots of room to grow, and may even benefit from people being reluctant to travel and instead sending more gifts this year. For more on what Kaldor had to say about the holiday e-tail season, read on.

TSC: In light of the events of Sept. 11, what is your current outlook on the upcoming holiday shopping season?

Kaldor: We created a forecast prior to Sept. 11 and came up with a range in our outlook. Since the incidents of Sept. 11 we are staying within that range, but toward the conservative end. We're forecasting a 43% increase year over year in spending, a 26% increase in the number of people shopping online. We have our numbers in already from September and online spending was up 56% from a year ago. So there's early indications that we still have a strong holiday season ahead.

TSC: The spread of anthrax has spurred widespread fear in the U.S. about opening mail and other packages. How does that fear play into the success of e-retailers considering the majority of goods purchased online have to be delivered by mail?

Kaldor: There's a range of impacts that we can expect from the current national security situation. People who are concerned about traveling are more likely to mail gifts. And if you're going to mail gifts, you are more likely to shop online or through catalogs to avoid another step in the process.

At the other end, friends and family are even more important [to people] when you are concerned about the big issues. So there's reason to believe spending [on gifts] will increase.

Specific to anthrax, there are concerns with sending envelopes and things and letters in the mail... But you know, if I am sending a letter to someone I know and they know me by the return address, I don't think that is going to be as much a problem. I think what really matters is how things transpire in the coming two months. If the threat increases, it will be a big issue. But I expect the threat to moderate or even subside in the next couple of months. At this point all bets are off because no one can predict what is going to happen.

TSC: Which online retailers will fare the best in the current economic climate?

Kaldor: Well ... right now we see 75% of online spending going toward brick-and-mortar branded sites, those that are in association with major established retailers. We expect them do well.

eBay(EBAY) and Amazon(AMZN) still have a stronghold as the pure plays. We expect them to do well, also.

And the toy category always shoots up enormously during the holidays. And especially this time now that Toys R Us(TOY) and Amazon are pairing up. Throughout the entire time frame, the two companies should be a force to watch.

TSC: Which retail sectors would fare the worst?

Kaldor: We are seeing the computer sector struggling overall and that's reflected online as well. The most difficult one to watch out for and that we have even excluded from our forecast is travel. Whatever restrictions arise with e-ticketing may complicate buying tickets online, and even if people do return to buying online as we have seen them start to do now, the average ticket prices are down.

So you may have just as many people but it is easier for them to spend less. The challenge more than security is macroeconomics. What do you cut when you need to spend a little bit less during the holidays? Apparel is another category that is easy to go shopping en masse but spend 10 to 20% less on every item as you cut budgets.

TSC: What about luxury goods?

Kaldor: Luxury goods are another sector that is going to be highly prone to ... the effect of the macroeconomic issues. It's not a good time to be spending a lot of money. Unemployment is going up, uncertainty about the future is at a peak and consumer confidence is in a trough. This is not an environment in which luxury goods prosper, and we expect that to be reflected in the upcoming holiday season.

TSC: What can we expect to see in terms of consumer electronics and video games, which are typically hot commodities around the holidays?

Kaldor: Well, yes, the holidays especially. You have parents giving gifts to children and usually one of the gifts high on the list does fall into that category. And we even see an age squeeze with people moving from [toys] to video games ever more quickly than in the past. This year the question is more around Nintendo's Cube and Microsoft's(MSFT) Xbox as different gaming platforms spur things along. So the release of those products and the release of them in volume are the bigger issue, rather than just the holidays in general.

TSC: Lastly, what do you want for Christmas?

Kaldor: (laughs) Well, if my wife would pick me up a nice little 53-foot Islander sailboat I would be a happy camper. But I don't think it would fit under the tree.

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