Some Online Holiday Sales Growth Should Outpace Bricks & Mortar

Implications: The 6% Jupiter estimate certainly seems reasonable.

Strong specialty retail is a good harbinger.

Online shopping continues to get easier.



Analysis:

Jupiter’s prediction of a 6% increase for online holiday sales growth over prior year is certainly a goal that seems reasonable in terms where sales growth is coming from to-date. Consumer acceptance of the on-line retail kingdom continues to grow and with today’s increasing level of competitive activity in the sector, both sides are winning. The consumer is allowed to manage their shopping time at will, is seeing an ever increasing assortment of products and experiencing virtually immediate satisfaction in the case of service.The retailer is selling at good margins, covering shipping costs and reducing overhead per transaction.

This year’s retail sales figures have shown strength in specialty retailers who get their assortments correct, i.e. American Eagle and Abercrombie & Fitch. Those same retailers will benefit from online sales.Additionally, with higher priced items continuing to do well, average $ rings & margins will increase. The key here is how online retailers get the consumers attention. With increased competition, and the ease of today’s search engines, consumer online choice has never been greater.Increased ad budgets will be required to drive traffic to sites and strong cross promotional activity in their bricks and mortar environment will also be helpful.

With the increase in competitive activity comes a savvier online consumer who will only tolerate the sites that are friendly.They must be intuitive and provide maximum ease in making a choice, completing an order and receiving timely and accurate shipments.This is especially true where color and size are involved as costs for returns are potentially high.

Retailers today are challenged enough to win and retain shoppers loyalties. I live in a Mid-Atlantic metro area, with a population of fewer than 1 million, yet chains like Coals can have 4 stores within 20 miles of my house or I can shop on line. A key component of consumer loyalty is my total experience in-store and online, assuring both sides are equally delighting. I am bullish on the chance for already successful online operations (and new, niche players) to have a great holiday season.While there is a market for cheap and cheerful overstock merchandise, sales on the internet to dump merchandise that has not moved in their stores (i.e. Gap) are going to continue to be difficult.This is because there must be an initial appeal to draw the consumer in.The likely winners in this closeout category will be those that are advertising and positioning themselves properly like Overstock.com.

So, as I send wine to my father-in-law and baby clothes to my brother-in-law’s new child in the U.K. using an online retailer this Christmas, I will feel better knowing I have been able to give them the brands they wanted without spending the gas and hours in the mall at the US Post Office.