Magazine Article | November 1, 2000

E-Tailers Aim For A Happier Online Holiday

Source: Innovative Retail Technologies

Online holiday spending is predicted to double from last year to reach $10 billion. E-tailers learned some valuable lessons in 1999, and have new strategies to handle shoppers in 2000.

Integrated Solutions For Retailers, November 2000

On the nights before Christmas, all through the house, creatures will be stirring, while using a mouse. And analysts figure they will be doing about twice as much clicking as last year. Holiday online shopping is predicted to reach $10 billion this year – up from $5 billion in 1999. While there were some much publicized online problems last holiday season, Anderson Consulting still found 73% of Web users ranked online shopping as the most satisfying way to purchase holiday gifts. This was compared to shopping in stores or through catalogs. Consumers appreciate the convenience, selection, and competitive prices found online. The predictions show that the problems of last Christmas, such as unfulfilled orders, late shipping, out-of-stock merchandise, and high-delivery costs will not prevent holiday shoppers from going online this year.

So, what have e-tailers changed for this year? Last year, e-tailers spent more money on advertising and promotions to attract holiday traffic than they did on improving their Web infrastructures. As a result, some e-tailers had trouble handling the influx of business. This year, companies have added features such as interactive customer service and online order tracking to help raise holiday customer satisfaction.

Catharine Harding, retail solutions director at Blue Martini Software, and Scott Silverman, VP Internet retailing with the National Retail Federation, look back at the 1999 season and detail how things will be different when cyber Santa makes his deliveries this year.

What were the expectations in 1999 for Internet retail holiday shopping?
SS (Scott Silverman): The expectations were very great, but the Internet is an unpredictable and evolving channel. There has been, and there continues to be, strong growth in the number of shoppers using the Internet. The number of retailers offering the option to shop online, particularly in the last year, is also expanding at a rapid pace. Challenges in fulfillment and in customer service were due to the Internet's unpredictability.

CH (Catharine Harding): For consumers, shopping online in 1999 meant avoiding the hassles of store-based holiday shopping. In addition to the convenience of 24/7 Internet shopping, consumers embraced the value proposition of online gift buying: select a gift with a few clicks of your mouse, then sit back and let somebody else wrap, pack, and ship the package. Ten percent of the U.S. population shopped online in the forth quarter of last year, many for the first time. Those retailers with solid Web stores captured thousands of new customers.

Were 1999 expectations accurate, or did retailers get more than they bargained for?
(SS): If you read the headlines in most of the general newspapers, you might have thought that e-tailers failed during the last holiday season. The media made us think that there were children all over the country crying because they didn't receive their gifts on time. Certainly, online shopping was the cause of some disappointment, but I think that was blown out of proportion. A lot of the customer satisfaction surveys released after the holiday season showed that the satisfaction levels were not nearly as bad as what was being portrayed. Unfortunately, those media reports were really shaping consumers' perceptions about buying online.

What lessons did e-tailers learn from 1999?
(CH): Holiday 1999 was back-to-school for e-tailers. Key lessons learned included recognizing the crucial importance of the back end of an e-commerce operation – fulfillment, inventory management, and customer service. Heavy volumes and unanticipated peak days showed e-tailers the importance of investing in scalable order fulfillment operations. Inventory management was another key challenge to e-tailers that should improve this shopping season through better tools and sales history. Retailers also recognized the importance of top-notch customer service. Customer service was ranked by online shoppers as the second most important determinant in choosing one online retailer over another, according to a new study from the Yankee Group. In addition to handling problems, call centers can provide the extra information or reassurance that a customer needs before placing an order. Retailers who make contact easy, whether via chat or over the phone, increase their conversion rates.

What will e-tailers do differently this holiday season?
(SS): Consumers are not going to be inundated with mass media advertising like they were last season. Online retailers had a different strategy last year. They were flush with cash and with capital. E-tailers dangled all kinds of incentives in front of consumers to encourage them to shop at a particular site. This year, there will be more of a focus on marketing to those people who have Internet access (only about 50% of all consumers). Retailers need to ask what they are trying to achieve with their Web sites. Some multichannel retailers are figuring out how the Web can be used to not only drive sales online, but in the store as well.

(CH): If Holiday 1999 was the heyday of online marketing, Holiday 2000 ushers in the era of online merchandising. Proven merchandising techniques include featured items such as best-sellers and exclusives at the home page. Sites will offer themed assortments like "express gifts" or "twenty toys under twenty dollars," and they will suggest related items to consumers on product pages. As part of their new focus on merchandising, many e-tailers have incorporated consumer usability testing and have redesigned their sites to enhance navigation and streamline checkout.

What new technologies are available to e-tailers?
(CH): As the e-tailing industry matures, so does the technology supporting it. Today's state-of-the-art site requires a commerce server, tax software, a product and content management application, a rules engine (for merchandising, promotions, and personalization), search tools, a customer database, as well as reporting and analysis tools. New requirements include support for wireless protocols, multiple languages and currencies. Fortunately, e-tailers starting out or relaunching their sites don't have to build their infrastructures from scratch. A site can get a head start by buying a JAVA-based application server and integrating a number of pre-built components. Choosing packaged applications leaves more room in the budget for high-impact merchandising.

(SS): The technology keeps getting better at providing data about who your customers are and what their preferences are. To be a good merchandiser on the Internet, location is not as important as data. Retailers need to look to data mining tools, personalization, and tracking to know where customers have been or are going. There is data that tries to understand what makes people buy things and how retailers should present them with the right products.

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