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Holiday Frenzy Tests E-tailers

By Doug Olenick and Alan Wolf

Inventory issues and consumer concerns over timely deliveries were just two of the sore spots online retailers overcame this past holiday selling season, as an estimated 10 million new shoppers hit the Internet.

Online sales dramatically slowed about seven to 10 days before Christmas, as some consumers lost faith in e-tailers' ability to deliver gifts by the holiday or due to popular items selling out, according to industry analysts. Hardest hit were e-tailers that depended on distributors to drop ship purchases, said Michael Flink, an analyst with the retail-consulting firm Levin Consulting.

Those with product on hand, however, were able to fulfill orders right up to the Wednesday before Christmas.

Frank Sadowski, merchandising VP at CE cyberstore 800.com, concurred. "The primary lesson e-tailers learned this season is that those who build an infrastructure for fulfillment and service will be the successful ones."

Robert Heiblim, CEO of etown.com, reported that his company's e-commerce function ultimately survived some rough holiday seas.

"I would be lying to say there were no hiccups, and some of that was due to the overwhelming response to our site," he said. But as opposed to Toys "R" Us -- which one Wall Street wag labeled the "poster child of e-commerce" due to repeated site crashes and its inability to fulfill Christmas orders -- etown experienced "no freezes or crashes."

Cybershop.com, corporate parent of Electronics.net, said that it was able to ship the vast majority of orders within one to two business days and to respond to all customer e-mail inquiries within 24 hours. "Our infrastructure was well-prepared for the added volume, and our Web servers, fulfillment operations and customer service all rose to the occasion," said chairman Jeff Tauber.

For e-tailers, the ability to have the product is especially crucial. According to a study by Active Research, Burlingame, Calif., 40 percent of those shopping online do so for convenience, while only 8 percent are on the Web looking for low prices.

The post-holiday period could also pose a challenge for e-tailers. Competing against the huge sales conventional retailers hold during this period to unload excess inventory will not be easy, Levin's Flink added.

The vagaries of online shopping did not deter many people. Jupiter Communications said there were 10 million first-time cyber shoppers during the holiday season.

Active Research reported that the total number of consumers who did at least some holiday shopping on the Web increased by 24 percent compared to 1998.

Active's research also showed that only 12 percent of the shoppers went directly to the site where their final purchase was made, while 26 percent started at a portal, such as Yahoo, 22 percent began by looking through a competitor's Web store, and 8 percent went first to a manufacturer's site.

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