The Case for a Blowout Holiday

ComScore expects online, nontravel spending will exceed $15 billion for November and December combined and post an increase of 23% to 26% compared with last year's holiday season. Quarterly cyber-spending will cross the $20 billion threshold for the first time, in the fourth quarter of 2004.

Elsewhere, Nielsen/NetRatings' Holiday eSpending Report, a collaboration with Goldman Sachs and Harris Interactive, said Monday that online shoppers in the U.S. spent $16.7 billion during the first six weeks of the 2004 holiday season, up 28% from the $13 billion spent during the time last year.

Online shoppers were buying such things as music, movies, jewelry, books, toys and video games with one mouse-click rather than braving the holiday crowds, and their purchases had no effect on some widely reported, lackluster sales results.

Meanwhile, a jump in gift cards this year is also believed to be muddying the sales picture. When shoppers purchase a gift card, it goes into the books as a liability for the store until after the holiday, when the gift-recipient redeems the card and the sale is recorded. So a chunk of holiday sales will go unrecorded until after the holidays have come and gone. Wally Brewster, senior vice president with General Growth Properties, which operates 220 malls across the country, estimated that gift-card sales are up between 25% and 40% this season.

"They're definitely a hot commodity this year," Brewster said.

Gift cards made up 8% of total holiday expenditures last year, according to the National Retail Federation. Mike Niemera, chief economist with the ICSC, expects that figure to grow to 12% this year. He also said online and catalog sales should make up about 11% of the spending pie, marking a sharp increase from last year, and services account for roughly 12%, also not captured in chain-store sales data.

"There's definitely a shift going on here, and these factors are taking on a larger role in the overall picture," Niemera said. But he cautioned investors about expecting a large sales boost when the total spending picture is ultimately pieced together. "We're expecting the overall season to be OK, not great, and the main weakness in sales comes from all the discounting, which is a result of weaker demand than expected. That's not a statistical problem."