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CE E-tailers Rally Despite Web-Store Woes

12/04/2000 02:00:00 AM Eastern

NEW YORK -Confident that they can elude the pall that has enveloped the dot-com community, electronics e-tailers have bulked up in anticipation of a huge holiday business.

For the past few months, many CE cyber stores-including pure plays, click & mortars and manufacturers-have fortified their sites with wider assortments, extra servers, more manpower, additional distribution centers and a healthy dollop of advertising.

But unlike 1999, when fourth-quarter outlays were made amid a sky's-the-limit euphoria, a shadow has descended on Silicon Valley, making this year's expenditures ever more dicey. Indeed, about 80 consumer selling sites have pulled the plug since January, according to Internet research site Webmergers.com, and a recent survey by Nielsen/NetRatings suggests that the consolidation could continue.

According to that group's Holiday E-Commerce Index, online sales between the last week in October and the first week in November stalled at zero-percent growth, compared with the same period last year when cyber traffic surged. For CE sites specifically, unique visits were up only 16 percent this year vs. 56 percent in 1999, while traffic at computer hardware stores actually fell 7 percent, compared with a 19-percent gain during the same week last year.

Representative of the CE pack is BestBuy.com. In 1999, traffic at the just-launched cyber store skyrocketed 128 percent during the first week of November but rose a more modest 21 percent during the comparable period this year, Nielsen/NetRatings reported.

Others beg to differ. According to Jupiter Research, 35 million Americans will buy holiday gifts online this year (compared with 20 million in 1999) and will spend an estimated $11.6 billion this month alone, up from $7 billion last December. Moreover, 79 percent of holiday cyber shoppers expect to blow at least 10 percent of their total gift budget online, while 18 percent plan to spend better than half of their dedicated holiday dollars over the Web.

As a category, consumer electronics will be well represented within online shopping carts, claims the Consumer Electronics Association. According to CEA market research, half of all likely online buyers expect to purchase at least one electronics product this season, and nearly 17 million households are at least "somewhat likely" to buy a CE product as a gift. The top choices: DVD players, video game systems, digital cameras and computer peripherals.

So far, it would seem that CEA's predictions have been borne out.

Frank Sadowski, senior VP/merchandising at 800.com, reported in mid-November, "We are already experiencing traffic and revenue close to that of our peak December days last year. With all the doom and gloom surrounding dot-com retail, it's nice to see that the customers are still voting with their credit cards. They do want to shop for CE products this way."

Other e-tailers apparently agree, based on their pre-holiday preparations. Among those gearing up in a big way is CircuitCity.com, which bolstered its Web infrastructure and added more products and shipping capacity.

Noted George Barr, the e-tailer's director of merchandising and fulfillment, "We've made major investments in enhanced Web servers and added telephone line capacity. We've also opened a second distribution center to help ensure on-time deliveries" of the site's over 2,000 CE products and 250,000 music, movie and video game titles.

BestBuy.com has also beefed up its software and video game selections, and has developed an "intelligent sourcing" inventory management system that integrates fulfillment of online, in-store and catalog orders.

"We have spent more than six months developing the back-end systems for fulfilling orders so our customers won't be disappointed this holiday season," said senior VP Connie Fuhrman.

Roxy.com, the satellite, wireless and CE site, is also secure in its fulfillment systems-so much so that it will refund upward of $100 on orders placed by Dec. 20 that don't arrive by Christmas.

According to Roxy chairman/founder Keith Clougherty, that faith is based on its decision to bring its fulfillment operations in-house within a newly built, 68,000-square-foot distribution facility and call center.

"We knew that taking total control of the customer experience was essential to handle this year's expected volume," Clougherty said.

New to the dot-com cavalcade is goodguys.com, which launched just days prior to Thanksgiving. The company, formed earlier this year by West Coast specialty chain Good Guys and a group of private investors, is initially offering over 1,000 products from some 70 manufacturers-including Bose, Denon, Sony and Toshiba-and plans to double the assortment by Christmas.

The site also features more than 300 full-motion videos providing 30-second product overviews designed to help shoppers make informed choices.

Explained CEO Walt Mulvey, formerly president of cameraworld.com, "Goodguys.com was created with discerning customers of consumer electronics in mind, and caters to their needs for detailed product information and visual demonstrations."

To make consumers aware of their online attributes, some e-tailers are returning to seasonal advertising, albeit at more modest spending levels than last year.

Among those mounting holiday campaigns is Buy.com, which pooh-poohed packed shopping malls under the tag line "Get in, get out," while a series of animated Best Buy spots include a Santa-suited price tag stuffing stockings via a laptop.

Another humorous campaign was aborted by Sonystyle.com, which officially launched last month following a five-month trial run. After a cable network balked, the site pulled a four-spot series that followed the abduction of a shopping-mall Santa by a pair of ruffians.

Sonystyle.com sells 750 Sony products, financial services and, beginning next year, Sony-branded dial-up and broadband Internet access through Covad Communications.


Top 10 CE Gift Choices Online Holiday Purchase Intent


1. DVD player

2. Video game system

3. Digital camera

4. Computer monitor

5. Computer printer

6. Scanner

7. CD recorder

8. Desktop computer

9. PalmPilot

10. Portable MP3 player


Source: CEA Market Research/Holiday Purchase Patterns

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