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Online Shopping Popular, but Won't Save Season

By Mae Anderson

ATLANTA -- More Americans are deciding to shop online this holiday season instead of heading to crowded stores.

But that alone won't save what is turning out to be a ho-hum Christmas for department stores and clothing chains.

Online sales have surged 9% so far this holiday season as Wal-Mart (WMT), Macy's (M) and other retailers improved their Web sites and prices to better compete with their online nemesis, Amazon.com (AMZN). Meanwhile, shopping at physical stores is up just 2%.

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Still, it's estimated that for every $9 shoppers spend in physical stores during the two-month season that ends on New Year's Eve, they'll spend only $1 online, according to research firm comScore.

Why? Retailers haven't solved many of the challenges that initially turned many shoppers off from buying online. Some Web sites still crash fairly frequently. Hot merchandise often sells out quickly online. And retailers haven't persuaded people to use their shopping apps on smartphones and tablets.

These lingering issues come from years of brick-and-mortar retailers mostly ignoring the possibilities of online shopping while online giants, like Amazon, got shoppers used to the convenience of it. Solving these problems will help determine how retailers fare during the holiday season and beyond as shoppers increasingly buy online.

"The people that are going to win ... are the ones that are there for the customer however they want to shop," said Joel Anderson, president and CEO of Walmart.com, Wal-Mart's online business.

The growing interest in online shopping is evident this season. Sales were up 2% to $176.7 billion from Nov. 1 through last Sunday compared with the same period last year, according to ShopperTrak, a Chicago store data tracker. Meanwhile, online spending from home and work desktop computers was up 9% to $37.8 billion, according to research firm comScore.

Still, analysts say online shopping isn't reaching its full potential because of a number of factors:

Sellouts and Crashes

In the early days of online shopping, frustrated shoppers often found the items they wanted to buy online were out of stock. In recent years, though, retailers have worked to increase their online inventory: For examples, Wal-Mart Stores Inc., the world's largest retailer, has doubled the number of items it carries online this year to 6 million.

Overall, retailers are better prepared than they were a few years ago to fill online orders via their inventory in store or in manufacturers' distribution centers, said Forrester analyst Sucharita Mulpuru. But they still have inventory problems that cause them to run out of popular merchandise, analysts say. And when that happens, retailers can lose potential sales.

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