Holiday Sales Soar at Several E-Tailers

Maybe Santa did come through for a few online retailers.

Some of the better-known names among Internet stores put a positive spin on a dismal Christmas season Tuesday -- notably Yahoo! (YHOO), Disney Internet Group (DIG) and the Kmart-backed (KM) BlueLight.com. And that spin wasn't about the underdog triumphing over the big guys.

Yet somebody's making money. From the beginning of November through Dec. 17, consumers spent $8.7 billion on holiday shopping, more than double 1999's corresponding figure of $4.2 billion, according to PC Data and Goldman Sachs.

Well, one of those companies is probably Yahoo!. In a press release that got the stock climbing, Yahoo! said that 2000 holiday-season order volume in the U.S. nearly doubled from 1999, while order volume nearly tripled for U.S.-based brand-name retailers that also have a physical retail store. (Order volume is the number of individual orders people place, ignoring the number of items in the order and the dollar amount.)

In addition, the average order size is "slightly larger" than last year, according to Yahoo! Shopping senior producer Richard Rogowski. He attributes that to the types of products that have proved popular this year -- DVD players, handheld computers and Sony PlayStation products, for example, rather than toys and Pokemon paraphernalia in 1999.

Rogowski, a veteran of the Gap, says the trend favoring companies with a brick-and-mortar presence probably reflects buyers' fears that online retailers might not deliver on time or are at a greater danger of going out of business than traditional retailers. "I think people are flocking to trusted brands a little more," Rogowski says.

Some other big-name brands did report robust results. Disney Internet Group's DisneyStore.com says revenue was up more than 85% from last year. Kmart's BlueLight.com says its holiday shopping season, from Oct. 30 through Dec. 21, posted a 1,000% gain in sales and an 823% jump in traffic from last year, when Kmart's online store's Web address was www.kmart.com.

The lesson for retailers from this holiday season is clear, says Martin McClanan, CEO of online and catalog retailer RedEnvelope. "Retail is about creating excitement about the merchandise," he says; it's not the technology that makes or breaks a company. "Either be a discounter and focus on having everything for everyone at the lowest price, or focus on being a premium price, premium service, premium product retailer. ... It's like yellow lines and dead armadillos -- you don't want to be in the middle of the road."

McClanan says holiday sales at his online gift store were up 400% from 1999; the company had more than 250,000 customers in 2000, compared with 45,000 customers before Christmas last year. Average order size grew from $60 to $90, a shift McClanan attributes to people putting more faith in the brand that his company has built and buying more gifts per order. "Consumers don't put us in the same box as other people trying to establish credibility this year," he says.

Looking toward 2001, McClanan says the calendar will favor online retailers over brick-and-mortar stores for last-minute shopping. That's because with Christmas falling on a Tuesday, Internet stores will be able to take orders for delivery Monday or even Christmas Day. This year, however, RedEnvelope's peak shopping day was Monday, Dec. 18, a week before Christmas. (Yahoo! says its peak day came Monday, Dec. 11, compared with Monday, Dec. 13, 1999.) "The ideal is Wednesday, Thursday, Friday," McClanan says.

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