Shoppers eager to seek bargains online

Convenience and lower prices have encouraged strong growth in internet shopping, but the trend is unlikely to last, writes Karlin Lillington

If you are an online merchant, 'twas a Christmas season to be jolly, as online shopping topped even the most optimistic predictions in the US, and plump gains were expected in Ireland, Britain and the rest of Europe.

In the US, the shopping spree leading up to Christmas saw online retailers bag more than $30 billion (€24.8 billion), according to analyst Nielsen/Netratings. The organisation said online purchases now accounted for 27 per cent of the total Christmas spend, with 68 per cent of purchases in bricks and mortar stores, and 5 per cent from catalogue sales in the US.

Those figures are a startling 30 per cent jump on the online share of the Christmas market in the 2004 season. Another analyst, ComScore Networks, offered lower figures of $18.1 billion in sales and 25 per cent growth over last year, but ComScore excludes sales from auction sites such as eBay, which Nielsen includes.

US shoppers spent about $3.5 billion online during Christmas 1999. Analysts expressed surprise at such strong growth, especially when several booming years in online shopping had brought predictions that growth would level off last year.

Online sales also far outpaced growth in shops, with the US showing just 3 per cent sales growth in what shop merchants considered a disappointing season, while in Britain, growth was only about 1 per cent in November, though sales finally surged at the end of December.

"E-commerce is gaining ground among consumers during the holiday season due to its convenience, product selection and lower prices," the Nielsen report says. "Most importantly, holiday shoppers are diligent about finding the best price. The continued popularity of search engines, such as Google and Yahoo!, highlights the ease of researching product selection and availability, and with a longer shopping season, it was much easier to wait for additional price reductions."

Online Christmas shopping growth in the UK, where final figures have not yet been released, was expected to blast ahead of the US, with an increase of at least 50 per cent on last Christmas's sales. According to the UK's Interactive Media in Retail Group (IMRG), Britain's 24 million online shoppers spent £2.25 billion (€3.27 billion) in November alone, an average of £94 each, and 50 per cent up on November 2004.

Deloitte predicted Britons would spend £150 million a day buying Christmas presents online during December; a new record.

Surprisingly, most online holiday purchases are not made by young people, but those in the 45-55 age group, Deloitte said.

No official figures are available for the Irish online market over the holiday period, but Michael Dwyer, chief executive of Irish discount shopping site Pigsback.ie, says he "guesstimates" 25 per cent growth in shopping compared to 2005.

According to Dwyer, Pigsback partners, which include eBay, CDWow, Blockbuster and Lastminute.com, do about a third of their total annual online sales in November and December.

"Lack of broadband has sheltered Ireland from the kind of growth seen in the UK and elsewhere," he says. While the company has 250,000 active members, "growth isn't hockey sticking the way it should be" and probably won't until Ireland's broadband take-up expands.

According to a survey by TradeDoubler, a European provider of online marketing and sales solutions, 56 per cent of Europeans said they would do at least a quarter of their Christmas shopping online, a 20 per cent increase on last year.

In the US, another boost in online and offline sales revenue is expected in the weeks following Christmas as consumers redeem an estimated $18 billion in gift certificates, many bought online but not included in seasonal sales totals, said the National Retail Federation.

US sales are evidence that online holiday shopping is now part of mainstream buying habits, said Nielsen/Netratings. Retailer LL Bean, which sells apparel and outdoor gear, and luxury retailer Nieman-Marcus both said their web sales surpassed in-store or catalogue sales for the first time.

Amazon and eBay were the two biggest shopping sites in the US, with Wal-Mart a surprise third, boosted by sales of luxury items not offered in its discount stores, such as cashmere jumpers and $250 chocolate hampers.

Amazon shoppers bought more than 108 million items from the start of November through December 25th at websites in the US, Britain, France, Germany, Japan and Canada, the company said, though it would not disclose sales figures. However, it did reveal it sold a $90,000 diamond ring through one of its sites.

Nielsen/Netratings said online shoppers spent the most on clothing during the holiday season ($5.3 billion), up 42 per cent from last year. Computer hardware and peripherals ranked second, with $4.8 billion, a 126 per cent gain on last year and the strongest growth in any category.

Consumer electronics pulled in $4.8 billion, a 109 per cent jump. Books and toys/video games were the last of the top-five product categories, earning $3 billion and $2.3 billion in online revenue respectively.

The books category jumped 66 per cent from last year, whereas toys/video games fell 9 per cent from the 2004 season.

Most shoppers expressed satisfaction with their online buying experience, with only 6 per cent telling Nielsen they were "somewhat dissatisfied" or "dissatisfied". Fortnum Mason and others contacted some customers to apologise for its inability to get online orders to recipients in time for Christmas, such was the increase in web-based sales.

A major growth area in the UK was in supermarkets, with Tesco and Sainsbury both saying they were deluged with online orders.

However, the good times are not necessarily set to last - or at least, online shopping growth during holidays is unlikely to continue at such a blistering pace, according to analysts. The market is maturing and internet newcomers are unlikely to keep boosting growth. Online shopping still accounts for only 6 per cent of all purchases in the US.