E-Tailers Hit Goals

Success linked to better service, delivery methods.

While traditional retailers begin discounting products to clear inventories in the wake of sluggish holiday sales, online retailers, surprisingly, appear to be meeting their sales expectations.

PC Data Inc. and Goldman Sachs Group Inc., in a joint study released the day after Christmas, showed online retail spending at $8.7 billion from the beginning of November through Dec. 17, the most recent week for which data was available.

That was on track to hit most analysts expectations of $10 billion in online retail sales in November and December, about double last years total.

Experts attribute online retailers success to a number of factors, including improved customer service and delivery methods—a lesson for any e-business.

But not all e-tailers shared the good news. "For some individual retailers, its not so clear that that was good enough," said Cameron Meierhoefer, an analyst at PC Data, in Reston, Va. "One hundred percent ... growth in most industries is quite positive. But companies like eToys [Inc.] needed it to grow faster."

In fact, eToys appears to be one of the big losers this holiday season. The online toy store last month said it will miss its earnings projection by almost half and is running out of money.

Toysrus.com, meanwhile, surged to second place on Nielsen/NetRatings list of the top 10 e-tailers measured by unique site visits. The brick-and-mortar retailers site, in effect, became the toy store for No. 1 e-tailer Amazon.com; Toysrus.com outsourced its fulfillment to Amazon this year after it was plagued by delivery problems last year.

Online retailers in general improved by leaps and bounds in fulfillment and overall customer satisfaction, according to Web site rating service BizRate. com. "The real winners this holiday season were the consumers," said Seth Geiger, vice president of business services at BizRate, in Los Angeles. "We really didnt see the horror stories we saw last year."

Online retailers improved their on-time delivery rates from 74 percent during the 1999 holiday season to 88 percent this year, Geiger said.

For their part, brick-and-mortar retailers had a strong online sales presence for the first time this holiday season, while their traditional sales were sluggish. Sites such as BlueLight.com (Kmart Corp.s online venture), Walmart.com and Target.com all are reporting strong sales growth during the holiday shopping season, although none has released official numbers.

Nielsen/NetRatings lists seven of these bricks-to-clicks sites on its list of the top 10 e-tailers. But two of the three online-only e-tailers on the list—eToys, No. 3, and CDNow, No. 7—are struggling financially and arent expected by many analysts to make it to next years holiday shopping season.