Merchants and Consumers Moving Up to Next Level in Online Shopping

Custom-made clown shoes? Art Deco bidet faucets? Handcrafted Amish quilts? When the Amish are online, you know that just about everyone is. And if you can’t find what you want now, just wait a few minutes and a dot-com company backed by venture capital will move in to seize that market.

Retail spending online looks to be on the rise. How much depends on whom you ask. Market research firm Dataquest says it will triple this year, with Web stores expected to take in more than $12 billion in the holiday season.

Last year’s online holiday shopping season was marked by fast growth, lots of hype, poor customer service and a handful of retailers who made up the bulk of sales.

This year, people are shopping earlier and spending more, while retailers are beefing up their ability to handle the flood of orders, both on the technology side and the practical matters of getting goods out the door.

The folks who bought books and videos online last year are ready to move up to more complicated items such as consumer electronics and even jewelry.

“The people who bought last year are starting to take some risks because they’re getting more comfortable with it,” said Ken Cassar, an analyst with Jupiter Communications.

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But there are also more than 10 million people this year buying online for the first time, Cassar said. That could mean a lot of hand-holding as the initiates, who tend to be less computer-savvy than the first wave of online shoppers, worry about sending their credit card numbers over the ether and demand that they get the same level of service that they are used to receiving from a traditional store.

Concerns over online customer service will cause people to spend more to get the same product from a merchant that they perceive to be more reliable, which explains why Amazon.com is the Internet’s top retailer, even though surveys show it tends to have higher prices than many online competitors.

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This year, there is better information available about online retailers, with market research firms such as Gomez Advisors and consumer protection companies such as BizRate.com having more data about Web stores’ performance, based on comments from people who have shopped there.

The Web-based tools for finding the best prices also have improved significantly, with MySimon Inc.’s site (https://www.mysimon.com) and WebCentric Inc.’s Bottomdollar.com (https://www.bottomdollar.com) searching more stores across a broader range of categories than before, not just computers, books and music.

New ways of buying things also have blossomed. Priceline.com has gotten a lot of press from its “name your own price” method, which, while not guaranteeing you the lowest price, at least gives you the satisfaction of making a choice.

Mercata Inc. (https://www.mercata.com) and Accompany Inc. (https://www.accompany.com) have pioneered the practice of group-buying online, getting low prices by finding lots of people who want to purchase the same product.

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Some new sites are trying out novel ways to attract users. Checkout.com (https://www.checkout.com), for example, which is backed by Hollywood figure Michael Ovitz and Ralphs grocery magnate Ron Burkle, pitches itself as an entertainment information site that happens to have a strong e-commerce component.

The idea, says Checkout Chief Executive Richard Wolpert, is to provide an element he feels is missing from most other e-commerce sites: impulse buying. Because most visitors to commerce sites arrive knowing what they’re looking for, the sites are forced to compete largely on price.

“But if you can get someone to come for the information and stay to buy,” he says, “then you don’t have to compete as much on price.”

The following are some reviews of the most popular online shopping categories.

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nline Shopping Soars

Retail sales from e-commerce sites have jumped tenfold in the last three years, although total e-commerce sales still accounted for less than 1% of all retail sales in 1998. Some analysts are forecasting that e-commerce sales will triple this year. E-commerce sales by product line:

Sales in millions:

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Category 1996 1997 1998 1999 (est.) 2002 (est.) Travel $273.7 $911.3 $2,226.4 $4,181.2 $12,802.1 PC hardware 82.7 985.5 2,126.7 3,106.0 6,434.4 Grocery 27.5 63.2 147.8 350.3 3,529.2 Books 27.0 151.9 649.7 1,138.8 3,661.0 Software 20.2 84.5 259.0 507.4 2,379.1 Music 13.7 36.6 134.7 280.6 1,590.6 Consumer elect. 8.0 15.0 30.0 78.0 792.5 Apparel 5.7 103.1 330.0 641.5 2,844.5 Entmt. tickets 1.7 51.8 122.2 274.4 1,809.9 Videos 1.0 15.0 50.0 104.5 575.2 Toys -- 2.0 20.0 52.6 555.3 Pharmaceuticals -- -- -- 6.1 331.9 Total* $706.0 $3,006.6 $7,071.6 $11,956.3 $41,099.3

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*Includes other e-commerce retail sales

Source: Jupiter Communications