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E-tailers face the ghost of Christmas past

Giving online shopping another whirl this holiday season, retailers need to deliver on promises and avoid past mistakes.

If the guy at Starbucks ruins your latte today, will that one bad experience prevent you from returning to your favorite haunt for your morning cup of java? That's the analogy Lauren Freedman, president of the e-tailing group, inc., Chicago, makes when asked whether consumers will be leery about giving online shopping another whirl this holiday season.

Despite the iffy experiences online shoppers have had in previous years - computer crashes, fulfillment problems, and lousy customer service - analysts say the Grinch won't be the victor this time. They offer this advice to Internet retailers: Prepare for an onslaught.

Cambridge, Mass.-based Forrester Research estimates that one-third of web users will log on to shop this season and spend $10 billion - two times more than they did last year. Shoppers won't be one-item purchasers, either: They'll kick up average spending for holiday-buying households to $603.

The Gartner Group, Inc., Stamford, Conn., is equally sanguine and predicts worldwide online spending will reach $19.5 billion, with North America accounting for more than half of online holiday sales. Online shopping in other regions - Europe and Asia/Pacific, for instance - will grow by 96% and 91%, respectively.

"Among the factors for the growth include more customers who have converted from Net users to online shoppers, more retailers online, and a greater acceptance - in both the United States and in Europe - of the Net as a shopping tool," says Astrid van Dorst, senior analyst for Gartner's e-Business Services.

Many companies spent the first half of 2000 improving technology and site performance, tweaking inventory and fulfillment management, and refining customer service. But whether the holiday shopping season will be good, and for whom, remains to be seen. Despite the heady forecasts, retailers really need to deliver on their promises to succeed.

"This is the proving season. Whatever you do either enforces, extends, or hurts brand loyalty," comments Eric Meerschaert, executive director, customer service and fulfillment for San Francisco-based Organic Inc. "Companies need to be wary of their second strike. Those that consistently under-perform this year and under-performed last year risk destroying consumer loyalty."

"The mantra for every retailer today is serve your customer better," says Elaine Rubin, chairman and co-founder of and president of ekrubin inc. Communicating honestly is one component of that service. "Most people won't be mad if you don't have something in stock. The guy who shops on Dec. 20 knows something won't be available. But let him know so he can make another choice," says Freedman. "Pick the right product, merchandise it, and give customers service and a good experience. These are classic retail issues."

Multi-channel engagement Others expected to flourish this season and beyond are multi-channel retailers - those that can service customers through catalogues, stores, and online - because shoppers can engage with retailers on all levels, and the approach embodies the "have it your way" style that consumers are demanding. Rubin says that for retailers, the single-channel consumer is valuable, the dual better, and the tri-channel the best.

Land-based retailers and malls, too, are adopting technology-based strategies to convert single-channel customers into dual-channel ones.

Chicago-based General Growth Properties, for instance, is employing its interactive site,, to help people pre-shop the malls, find sale items, buy gift cards, and register for coupons and e-mail updates on upcoming specials.

There's also fun stuff for the kids: During the 12 days leading up to Christmas, Santa will read a different holiday story each night online, and GGP will be sending e-mail updates from Rudolph about the holiday flight schedule. "The kids have something to look forward to everyday, and it keeps people coming back to the site," comments Keith Maladra, a GGP vice president.

In addition, interactive kiosks will offer consumers the opportunity to shop retailers and services not found in the 136 malls in GGP's portfolio. The approach offers customers a broader selection and allows dot.coms to reach brick-and-mortar shoppers without incurring the costs associated with having physical space.

"We're breaking new ground. Online shopping doesn't mean the end of brick and mortar shopping," comments Maladra. "All this online retailing has presented a new opportunity by getting us thinking about how we can leverage technology to drive brick and mortar sales."

It's the kind of thing recluses, couch potatoes, and those trapped in the clutches of winter cheer for. They're same-day delivery services - such as and - that will trot over with groceries, a best-selling novel, nasal spray, a hot new CD, or Mop & Glo floor cleaner.

Here's how it works: Consumers log on to the site, register, pick out items, punch in a credit card, and then wait for the doorbell to ring. Kozmo boasts that it provides instant gratification by executing deliveries in under an hour in 11 cities, including Boston, Chicago, Houston, and New York., best-known for groceries, operates in four markets, including Atlanta and Chicago, and lets consumers pick a 30-minute delivery window. The site also offers movies, CDs, books, and household basics.

Such sites aren't the place where consumers will go for soups-to-nuts holiday shopping, but analysts believe the sites' instant gratification dynamic is ratcheting up consumer expectations.

"We'll see these kinds of services becoming much more apparent in other businesses," predicts Tim Wujcik, senior vice president, e-business, of Ray & Berndston's Chicago office. He compares it to a manufacturer that would design a new car without airbags. "Consumers would ask, `Why don't you have airbags that are now an industry standard?' Eventually online shoppers will ask, `If delivers within X amount of time, why can't you?'"

Although their role remains to be determined, these instant gratification sites have great potential to negotiate strategic partnerships and play new roles in the ever-evolving e-game, say analysts. Potential roles include:

- Acting as a roving Mail Boxes, Etc. "If they're delivering to your house twice per week anyway, for instance, why not leverage their convenience mechanism and send UPS packages back with them," suggests Freedman.

- Striking deals with local malls picking up and delivering merchandise and taking customer returns.

- Teaming up with retailers such as The Home Depot or Circuit City that have both stores and an online presence to deliver orders placed on line.

- Encouraging e-tailers to open local distribution centers and act as the speedy, same-day delivery service for those companies.

"Every time a new entrant comes into the marketplace and does something good for consumers, it raises the bar," comments Rubin. "These kinds of services represent an opportunity for dot.commers to offer alternative delivery channels."

A strong 82% of consumers say they expect to spend more or the same as they did last Christmas, according to the 15th annual Consumer and Retailer Mood Survey: Retail Holiday Outlook conducted by Deloitte & Touche in affiliation with the National Retail Federation.

According to this year's Mood Survey, 17% of respondents, including those who don't use the Internet, expect to be shopping on the web. Among those who are online, 42% say they will be buying gifts in cyberspace. Online buying was most popular among 25-34-year-olds and, predictably, least attractive to seniors 65 years and older. An exceptional 91% of those who had already made a purchase on the Internet in the past year plan to buy holiday gifts online again.

More than half , 55%, of all internet users had made a purchase online in the past 12 months. Males were slightly more likely to have made purchases than were females. The younger age groups and the higher income segments were also more likely to have bought a product or service on the web.

These groups like online shopping mostly because of 24-hour access and the fact that it saves time and allows them to browse hassle-free. The promise of quick delivery to the home also kept shoppers coming back to cyberspace, as did the lure of not having to pay sales tax.

Satisfaction levels with online purchase experience were generally high, but not universally so. Consumers' satisfaction with online shopping was rated 8.1, using a scale of 1-10, where 10 was "extremely satisfied." Respondents based their rating on the 12 orders they placed, on average, over the past year. Their total online spending averaged $1,206 for those orders.

The Mood Survey was not all good news for e-tailing. More than one in five (22%) of Internet shoppers said they had at least one negative experience in the past year. The younger age groups were generally more critical than the older age groups. On average, Internet shoppers said they had 1.6 negative experiences, with the top reasons being that merchandise was not received as represented on the website, that items were delivered late and products or services were never received.

But online shopping is still on its way to becoming mainstream. The average amount expected to be spent online by Internet users is $264 for this holiday season. Since these Internet buffs expect to spens $957 in total for all their holiday gifts, the online share represents 28% of their total budget.

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