December 27, 1996 1:15 PM PST

If you build it, they will shop

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This holiday shopping season proved at least one thing: People will shop online.

Online businesses didn't rake in oodles of cash from online transactions, but many merchants said they met or exceeded sometimes modest expectations. They also look forward to next year, when they hope online shopping will establish itself as a real force to compete with retail outlets and mail-order businesses.

"This was definitely the first real holiday shopping season on the Internet," said Nicole Vanderbilt, an analyst for Jupiter Communications, which put out a report just before Christmas projecting online sales to reach $194 million during the holiday shopping season. Online statistics were unavailable this soon after Christmas, but merchants who were contacted all said they had a good season.

"If you tried to do Internet shopping last year, you would have had slim pickings," Vanderbilt said. "You're seeing a lot of household names out there now."

Big sellers included items that you don't need to touch, try on, or see, such as books, CDs, and software, Vanderbilt said.

Cyberian Outpost, for instance, had a banner month selling computer products, a natural on the Internet, said Bob Rathbun, vice president of marketing and business development. "We're in the throes of having our largest month ever," Rathbun said. But, he added, "Our business has been growing steadily and dramatically since it opened two years ago." And every month is better than the last.

And the much touted Amazon Books, a strictly online bookstore that boasts 1 million titles, had sales quadruple during the holidays, according to Jennifer Cast, Amazon's acting vice president of marketing.

"Overall, we've been growing in sales at 34 percent per month," Cast said. "If you provide people with benefits they can't get in the physical world, then e-commerce will work for you."

Amazon had no reports of fraud, and very few problems with package delivery, she said.

Online shipping also had a notable surge this season. Federal Express interNetShip had its highest peaks in orders yet on December 19 and December 20, said Doug Topken, managing director of electronic commerce.

InterNetShip launched in February and lets Federal Express account holders create shipping labels and order pickups using the Web. Overall FedEx had its best season ever, shipping 4 million packages one night, Topken said.

Newer players on the online scene also reported healthy shopping.

Macy's West "Top 40 Gifts" site, launched on November 20, site did better than expected. In fact, it sold out of many items.

"It did almost too well," said Ira Victor, president of 452 Degrees , the store's Internet marketing agency. "We sold out of a lot of items. For instance, Calvin Klein picture frames sold out and sporting items did well."

Macy's West wouldn't disclose sales figures, but Chief Financial Officer Kent Anderson said several hundred visitors bought items and he added that the average purchase on the Web was higher than in the retail stores--a key retailing benchmark.

"We did find that there is virtually no price resistance," he said. "We believe the Internet is not a substitute for traditional shopping, but it's a niche market."

In other online shopping news today, eBay unveiled its AuctionWeb, which lets people auction off unwanted gifts instead of returning or exchanging the items.

Joshua Tretakoff, manager of alternative media for The Sharper Image (SHRP), on the other hand, sees online shopping as a viable third channel--adding to store and mail-order sales --for upscale retail sales.

"This has been the explosive year we were counting on," said Tretakoff.

Sharper Image, a Net veteran with a two-year presence on the Web, saw a 500 percent increase in online business this season, Tretakoff said. This year, online sales comprised 2 percent of all sales and 75 percent of that business came from transactions on America Online (AOL), Tretakoff added. AOL, incidentally, reported $2 million dollar sales days this season.

Last year the Sharper Image's online sales "didn't even make a percent," he said.

Online business, said Tretakoff, "is getting out of the novelty phase and into a serious business. I expect it to be a viable third channel of distribution for the company."

"This was the first year that Internet commerce and shopping online became an option rather than novelty," he said. "Next year is when it will be judged as a real business."

 

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