Online Holiday Shopping Expected To Rise

By: Anne D’Innocenzio, AP Business Writer

(AP) Catherine Ryan, who plans to fly to Phoenix to visit her mother this holiday, will be buying most of her gifts online this year. With the airline industry’s newly implemented security measures and limitations to one carry-on bag, the Los Angeles resident says she needs to “travel lighter.”

Sandra Beckwith, who bought about 20% of her holiday gifts on the Web last year, plans to do most of her shopping online this year too — to avoid additional stress.

And Josef Blumenfield doesn’t plan to step in a “public mall” in November and December. Turning to e-commerce, he said, will be “less aggravating and safer.”

In the aftermath of the Sept. 11 terrorist attacks and the threat of more to come, e-commerce companies are counting on consumers like Ryan, Beckwith, and Blumenfield to help boost online holiday sales.

The good news is that even though online spending took a dip immediately after the Sept. 11 attacks, the category made a strong recovery. Online commerce sales were up 17% the week ended Oct. 8, from the week ended Sept. 10, according to BizRate.com, a comparison Web site and research firm that tracks 2,000 online sites.

Sales at brick and mortar stores, meanwhile, have recovered from the post-attacks dive, but remain a bit below what is normal in a recessionary environment, retail analysts said.

“Families are staying home and the online retailers are benefiting disproportionately,” said Chuck Davis, chief executive officer of BizRate.

Indeed, consumers like Beckwith, already stressed out by all the news, simply have less patience for shopping in cramped stores.

“I am not worried about inhaling anthrax at the Gap,” said Beckwith, of Fairport, N.Y. “I am just irritated more easily, so I have much less patience for being in a crowded place, and getting elbowed.”

Davis said the Internet should prove even more valuable in these tough economic times, since it allows bargain hunters to comparison shop and save time looking for particular items.

Whether these benefits will be offset by the overall slump in consumer spending, remains to be seen. Last year’s online holiday sales, hit hard by the industry shakeout and a slowing economy, failed to meet expectations.

In fact, a possible new challenge for e-commerce firms, like Amazon.com, could be the anthrax scare, which may make consumers nervous about receiving packages in the mail.

Beckwith said that won’t stop her from ordering gifts online, though she will take some precautions, such as examining her own packages and alerting friends of packages she is sending.

BizRate, which doesn’t track travel-related sales, projects a 31% gain in holiday online sales over a year ago to $6.3 billion, from last year’s $4.8 billion.

Others were more cautious. “My general sense is that the negative economy will have a bigger impact on e-commerce than any benefits,” said Ken Cassar, a senior analyst at Jupiter Research.

Cassar’s preliminary projections call for a 10% to 20% growth in online holiday sales, from last holiday’s $10.8 billion. That compares with a 50% jump in last year’s holiday business over the prior year’s levels, far short of the 70% gain expected.

“The terrorist attacks have exacerbated the negative retail trends, which have dragged down the entire economy,” Cassar said. “And the Internet is being dragged down with it.”

Jupiter Research’s Cassar predicts that free shipping and handling will be the most popular incentives this holiday to draw customers, as opposed to discounts on products, which have proven less effective.

In the end, analysts acknowledge online sales will depend on how free consumers are with their spending amid increasing economic and political uncertainty and mounting job losses.

Cassar anticipates consumers will act like Blumenfield, from Natick, Mass., who said he probably will be more tightfisted. “I will be buying fewer frivolous gifts,” said Blumenfield.

Beckwith, who already used a $15 coupon from Eddiebauer.com to buy a Christmas gift, said she plans to spend the same amount, but will be scouring for more bargains online.

Ryan, on the other hand, said she plans to spend even more on gifts than a year ago “in an effort to reach out to more friends.”

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