Happy Holidays For Online RetailersHappy Holidays For Online Retailers

Online shoppers spent a record amount during the holidays, according to an end-of-the-season report released Tuesday by Goldman Sachs, Harris Interactive, and Nielsen/NetRatings.

Online holiday shoppers laid out a record $18.5 billion during the November-December buying season on goods ranging from apparel and video games, to computer hardware and DVDs, said the three firms, which pooled their data to assemble the year's final eSpending report. That's an increase of 35% from 2002, when online shoppers spent $13.7 billion.

"Online retailers enjoyed a fantastic season in 2003," said Abha Bhagat, a senior analyst at Nielsen/NetRatings. "This is the third straight season of record growth, which indicates retailers are doing a much better job of appealing to customers through online channels."

Clothing led the way in online purchases, accounting for $3.74 billion of the total, a 40% jump from the previous year. Toys and video games ranked second with sales of $2.2 billion, while consumer electronics, computer gear, and videos and DVDs rounded out the top five categories. Consumer electronics posted the smallest year-to-year increase, with sales just 2% above 2002's.

Although the research firms attributed some of the growth to the overall improvement in the economy, a pair of drivers really made the season jolly for retailers.

"The maturation of the Internet population--that people are more readily willing to move into online purchasing--is a strong reason why sales jumped," said Lori Iventosch-James, director of E-commerce research at Harris Interactive.

Not only are more people willing to shop online, they also dedicated more of their holiday budgets to E-purchases, the eSpending report noted. The more than 9,000 shoppers polled during the two months said they were allocating 19.7% of their total spending to online purchases this year, a jump of 3.4% from 2002.

But the biggest reason sales soared is the improved job that online retailers are doing in presenting their wares and delivering them on time. "Retailers have done a very good job of making the experience a positive one," said Iventosch-James. "They're removed as many of the barriers as possible--offering free shipping is one--and they've gotten much smarter about reducing serious errors."

That's borne out by the report data, which found that the two most common problems cited by shoppers--late arrival of a purchase and receiving an incorrect order--remained at low levels. Just 3.6% of all shoppers surveyed reported one of these problems.

"That's not dramatically different from last year," said Iventosch-James, "but you just don't hear the level of issues of, say, three years ago. Retailers have worked out the kinks in their delivery mechanisms and what guarantees they give for delivery."

While none of the findings ranked as a surprise--companies like Harris Interactive have been noting an increase in online sales throughout 2003--for Iventosch-James's money, the most interesting finding was the significant boost in apparel's online sales.

"Clothing isn't your typical online purchase," she said, "and usually doesn't lend itself as well as other goods to online shopping." She attributed the 40% spike in sales over last year to "strong advertising, especially by major retailers like The Gap, Lands End, and Old Navy."

The continued integration of retailers' brick-and-mortar and online sales sites is another reason for the jump in E-sales, said Iventosch-James. "Consumers are looking for an integrated experience and the strength of a brand," she said. "Today, the consumer doesn't feel like the two [online and physical storefronts] are two separate entities. That's a major change from the dot-com days, when companies split off their online, and in some cases, competed with them."