With online sales faring much better than offline over Christmas 2002, are retailers and consumers at last happy with the idea of buying on the Web?

Christmas cheer
24 January 2003, New Media Age
Dianne See Morrison
With online sales faring much better than offline over Christmas 2002, are retailers and consumers at last happy with the idea of buying on the Web?
High street retailers may have had a disappointing Christmas sales season, but online shops had happier holidays. A number of e-tailers and retailers with Internet arms are reporting that their Christmas sales grew substantially from the year before.
It's not just online-friendly goods such as books and CDs that shoppers snapped up. Internet shoppers also bought clothing, food and drink, and even top-of-the-range plasma-screen TVs. Virgin Wines reported that sales were up 65% on Christmas 2001, while the mail order and Internet clothing business, Boden said its Christmas sales were up 62% from the previous year. Comet, the high street electrical goods retailer, reported that its online sales had doubled, while Johnlewis.com says seasonal sales trebled.
This large increase in online sales has come at a time when high street retailers are experiencing their most difficult shopping season in 10 years. For the first time since 1992, high street sales figures fell in December 2002 compared to the previous year. Dixons, one of Comet's high street rivals, reported disappointing Christmas sales at its bricks-and-mortar stores and has since issued a profit warning.
As the high street struggles, the success of e-Christmas 2002 may well mark the year when e-commerce finally shed the taint of the dotcom bust and gained newfound respect as a viable low-cost channel.
So what has changed in the last few months? Rowan Gormley, CEO of Virgin Wines, believes that online stores - and especially those that have survived the bust - have at last earned consumers' confidence. "A lot of flakey companies have gone out of business, and those that endured have much more credibility with the consumer," he says. Online stores that have a high street presence or a recognisable brand backing them, such as Virgin, are especially benefiting from this renewed confidence.
Consumers, meanwhile, are no longer as fearful of online fraud. Julian Granville, MD of Boden, the online clothing and catalogue retailer, says, "The one who has to pay in the end is the retailer that allowed the fraudulent purchase to go through in the first place. Consumers are never liable for any charges which they haven't authorised."
With this added confidence, shoppers are spending more online than ever before. A survey by Comet revealed 57% of its online shoppers spent over £100. In 2001 that figure stood at 33%. Indeed Comet, which has some 250 high street stores across the UK, sold a number of high-ticket items on its site, including 2,000 widescreen TVs and 10 plasma-screen TVs retailing at around £2,500 each.
Bargain hunting
Retailers also note that many shoppers took to the Web this Christmas to look for holiday bargains. While offline consumers held back for the post-Christmas sales, online consumers were already on the hunt for discounts. "Discounting is driving online sales," says Granville. At Boden, for example, nondiscounted online sales account for just 25% of total sales, whereas discounted merchandise accounts for 50%. "It's a speed thing," says Granville. "When it comes to sales, people have to be quick to get the bargain. They know they can get on the Internet, find what they want, and buy it immediately."
Finally, consumers are driven by convenience. As connections get better and more online users switch to broadband, shopping will become a quicker, more convenient process that saves them from facing the Christmas crush of shoppers. According to Comet's customer survey, four in 10 of those queried said they were doing at least half of their shopping online because it was "easier, more comfortable and more convenient". Says Gormley, "The offline shopping experience can be very inconvenient, what with parking and contending with crowds."
Meeting demand
Meanwhile, with three previous e-Christmas seasons to learn from, online stores have finally reached high standards of fulfilment and delivery of customer orders.
Some, such as Amazon and Virgin Wines, were even offering next-day delivery as late as 23 December. Other online stores have learned that it can be as simple as not over-promising to customers.
Johnlewis.com, for example, decided to stop taking Christmas orders after 12 December, as orders had already reached 300% of 2001's level. "We still took orders, but we effectively took away the promise that the goods would be delivered on time for Christmas," says Simon Palethorpe, MD of John Lewis Direct. He adds that despite this "non-promise", 99% of goods ordered for Christmas did make it in time.
So when exactly will online shopping hit the mainstream? According to Forrester, the Internet and technology research firm, online shopping now accounts for 4% of all retail spending in the UK, and has broken the £2bn barrier. In November 2002, shoppers spent £1bn online.
"I would argue that online shopping is already mainstream," says Hilary Perchard, head of marketing at e-Comet. "We've sold a lot of very mainstream products, such as washing machines, bread makers and DVDs, to a lot of mainstream customers. The Internet also continues to be our fastest growing channel." Palethorpe agrees. "We have a very broad spectrum of online customers, not just the typical 18-35, tech-savvy males. The Internet really is so pervasive now, and our goods do appeal to a wide range of consumers."
Meanwhile retailers, and especially those with an established physical presence, are looking at the growth in sales with cautious optimism. The notion that overheads can be reduced through selling over the Internet is once again being resurrected. Boden, which still sells most of its clothes through its catalogue business, says it's hoping to migrate more of its expensive catalogue customers to the Internet.
John Lewis Direct's Palethorpe adds that for a company like his, the Internet can be a very efficient medium for growth. "As we operate on such a large scale already, the Internet can be a very efficient medium for us," he says. "As the online portion of our business gets larger, the rest doesn't need to - except, of course, for fulfilment. It's all about efficiencies of scale."
:: E-Christmas Facts
:: UK shoppers spend 1bn in November alone; UK online shoppers rise to 10m.
:: Amazon ships 55m items worldwide, 99% of these shipped inside the US.
:: Virgin Wines sells 50 tons of wine.
:: Comet sells over 2,000 widescreen TVs on its e-Comet site, as well as 10 plasma-screen TVs retailing at 2,500 each.
:: Performance Statistics
Download time Availability
johnlewis.com 1.47 secs 100.00%
amazon.co.uk 2.69 secs 100.00%
borders.co.uk 2.50 secs 100.00%
sainsbury.co.uk 2.82 secs 99.88%
debenhams.co.uk 4.03 secs 98.01%
dixons.co.uk 7.41 secs 97.79%
Source: Keynote Systems, 5-11 December 2002