It's not easy doing clicks without bricks.
That's the postmortem for online shopping this holiday season.
While many gloomy forecasts for online sales dominated the preholiday airwaves, the numbers rolling in show that Americans were eager to hit the Web for holiday gifts. However, e-tail giant
aside, established retailers with online offshoots were the clear winners.
Figures unveiled Wednesday by industry research group
Jupiter Media Metrix
show that $10.8 billion was spent online during the holiday season -- not quite as much as industry experts expected but not too shabby amid a slowing economy. This figure was 7% shy of Jupiter's estimate and 54% above the $7 billion spent last year. And while customer service complaints dogged online retailers during last year's holidays --
was a notable example -- consumers gave better marks this year.
"Online retailers who invested in improving back-end operations this year were winners in satisfying holiday online shoppers," says Heather Dougherty, a Jupiter analyst. "However, moving forward, the challenge is for retailers to retain and expand customer relationships, and continue to increase online sales to justify investments well into 2001."
And if the buzz at this week's annual gathering of the
National Retail Federation
in New York City is any indication, online retailing is alive and well. However, the overwhelming vibe is that traditional retailers are the ones that will make online shopping work -- not Internet-only retailers. Consider some of the seminar topics: "Online Marketing -- It's Not Just About Advertising"; "Making Retail Click"; "Multi-Channel Shopping: The Customer Perspective."
"Bricks-and-clicks took a tremendous amount of market share from the pure plays," Seth Geiger, vice president of e-commerce and professional services at online marketplace
, told a gathering Tuesday at the convention. "And I think we'll see that continue."
One of the biggest winners in the online holiday sweepstakes was
, the once-maligned Web site of the nation's largest retail chain. While the company took the unusual step of shutting its site in October for a face lift, the revamped site saw its number of unique visitors jump 54% from November to December, the largest jump of any Web site. That put it in the top 50 among all Web properties (not just Web retailers), according to a separate set of figures released by Jupiter. (Another big
winner was Toysrus.com, thanks to its co-branded site with Amazon.com, which saw its holiday sales triple as it gained market share from the Internet-only toy seller Etoys.com.)
Other sites seeing the largest gains in the number of visitors were the online arms of such established retailers as
, according to Jupiter.
While many in the industry have claimed that shoppers like a variety of outlets for a single retailer -- the mall, the Web site and the catalog -- until now much of the evidence was anecdotal. According to recent research provided by the
National Retail Federation
, 60% of online shoppers also buy goods in the Web site's brick-and-mortar outlets, while store shoppers who also visit a company's Web site spend 24% more per store visit.
What this means is that in many cases traditional retailers have a huge advantage over pure Internet retailers when selling online. "The same customers that shop our three channels
shops, Web site and catalog are the ones turning out to be our best customer," says Shelley Nandkeolyar, vice president of
e-commerce division. And at electronics giant
, around half of online shoppers prefer to pick up their purchases at a retail store, offering evidence that big-ticket items will be a hard sell for pure Internet retailers.
Headlining the list of casualties was Internet-only toyseller eToys, which laid off about 70% of its workforce following a dismal holiday season, and is on the verge of collapse. And
, an online shopping site with
co-founder Paul Allen as a backer, said it will close its operations at the end of the month. In a statement, the company said it was the "latest casualty in the market rejection of e-commerce."
With Internet-only retailing close to dormant, investors face a new conundrum: how to judge the so-called bricks-and-clicks phenomenon. For example, when weighing whether to invest in, say,
, should an investor care about Walmart.com?
Some analysts say no.
"It's such a small part of this huge company, that it's not something that has a significant impact on earnings," says Karen Sack, an analyst at
Standard & Poor's Equity Group
who covers Wal-Mart. (She has an accumulate rating on the stock, and her firm does not do underwriting.) Wal-mart rakes in more than $180 billion a year in revenue, and does not break out sales from its Web site.