Online shopping dropped as Christmas drew nigh

InfoWorld |  Business

IN THE WEEK before Christmas, all through the house, online shoppers stopped buying, forsaking the mouse. The stockings were hung by the mailbox with care, in the hopes that the FedEx guy soon would be there.

As expected, online sales in the week before Christmas -- judgment time for online retailers -- dropped to just more than $1 billion, according to a new study released Tuesday from Internet market research company PC Data and investment firm Goldman Sachs.

"We expected spending to fall because people had finished their shopping," said Cameron Meierhoefer, an Internet analyst at PC Data. "Most of the online retailers stopped guaranteeing delivery before Christmas around the 15th or 16th [of December]."

Consumer online spending dropped $540 million from a peak of $1.6 billion during the prior week. PC Data and Goldman Sachs estimate total online retail sales of $9.8 billion between the first week of November and the week ending Dec. 24. The comparable time period last year brought in $4.7 billion.

Although a doubling of dollars spent online in a year looks impressive, Meierhoefer said that it is hard to tell what's normal yet. "When every month is the highest month you've ever seen, it's hard to get a handle on the impact of forces on sales. If the economy had been more robust, would we have seen 150 percent growth? I don't know."

Meierhoefer does not expect sales to double again as the U.S. economy's growth slows and computer penetration in U.S. homes slows as well. "We're moderating what is fairly large growth," he said. "Spending patterns are maturing."

Brick-and-mortar stores with online sales sites -- so-called "bricks-and-clicks" operations -- made progress at the expense of purely Internet sales sites, Meierhoefer said.

"E-retailers like EToys lost ground to companies like Toys-R-Us," Meierhoefer said. Online retailers had to show they were either growing phenomenally or leading their market to survive, he added.

One Internet leader, Amazon.com, held between 8 percent and 10 percent of the online retail market, according to analysts. Amazon is on track to reach its revenue goals of about $1 billion for the quarter, according to Jeffrey Fieler, an analyst at Bear Stearns.

The survey of 2,715 home-based Internet users conducted Dec. 25 through Dec. 28 asked about users' buying practices from Dec. 18 to Dec. 24. Computer products, consumer electronics, appare,l and big-ticket items led the field for online shoppers this year.

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