'Twas Long Before Christmas

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As if traditional retailers needed more incentive to go online, along comes further proof. In a new study by NFO Interactive of 4,000 online households, 23.8 percent of respondents say that online shopping has increased their typical annual expenditures on products and services.

And nearly one in four believe that the Internet will reduce the amount they spend on products and services at traditional walk-in stores in the next six months.

Six months from the study's June release date lands us smack in the middle of the holiday shopping season. Who's likely to skip the crush at the mall and play Cyber Santa instead? The young and the rich: Roughly 28 percent of online consumers aged 35 and under and 28 percent of households with incomes above $75,000 say they'll spend less offline the rest of the year. Geographically, households in the South and West are more likely to log on and shop than consumers in other areas. According to Forrester Research, projected online sales for 1999 show an increase of 250 percent from last year, bringing the total online market value to nearly $18 billion. That's enough to make most retailers see www.$$$.com. "Last year, retailers didn't feel they would lose money if they didn't go online," says James McQuivey, senior analyst at Forrester. "This year, they do stand to lose."

Forrester projects online spending in the consumer electronics industry to jump to $2.8 billion from $1.6 billion last year. Even more astounding is its projection for 2003: $21 billion. Circuit City, the nation's number-two consumer electronics retailer, didn't need to be convinced. Last January, just after the holiday season ended, CEO Richard Sharp announced that the company would be online before Christmas this year. The Richmond, Virginia-based company, which rings up more than 26 percent of its annual business during the Christmas season, met its deadline. Its E-Superstore debuted last month and allows consumers to purchase online nearly every item available in Circuit City's retail stores. Customers can pick up the item at the nearest store or have it shipped to their door. A full 15 percent of visitors to the site do not live near a Circuit City store, company research shows.

Best Buy, the top retailer of consumer electronics, has yet to announce plans for an expanded online site. Currently, the company's site offers CDs, videos, and several other items for purchase, but lacks the depth of Circuit City's site. "Best Buy.com will become a more significant part of the company as time goes on," says Joy Harris, spokesperson for Best Buy in Edina, Minnesota. But that might be too late, experts warn. "Companies have to realize that their Web sites can cannibalize their business offline. But in the end, the question is, do you want to eat your business or do you want your competitor to eat it?" says Forrester's McQuivey.

Eddie Bauer is one company that is seasoned in both the online and offline worlds. The retailer, which has over 600 retail stores worldwide and a catalog division, opened its online store in 1996. While the biggest chunk of transactions still take place in its stores, the company sees the fastest sales growth online. "We're not surprised that we find growth rates of over 200 percent each year," says Steve Kahn, marketing manager for Eddie Bauer's interactive media division. Eddie Bauer can expect more competition as the holiday season heats up - Abercrombie & Fitch plans to add e-commerce capabilities to its site this fall. If the consumer won't go to the mall, the mall will go to them.

For more information about the NFO Interactive study, call (203) 629-4837.

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