Leveraging holiday e-shopping

Online spending this holiday season is expected to reach $2.3 billion, up from last year's $1.1 billion, as Netizens increasingly turn to the Internet for their shopping needs, according to a study released today.

However, given that only 16 percent of all online purchases ultimately become gifts, an overwhelming majority will spend their money shopping for themselves. That leaves the door open for e-commerce sites to convert these "self buyers" into more revenue-generating gift buyers, concluded the study by Jupiter Communications.

Eleven percent of the online buyers participating in the study said the majority of their purchases were gift-related, while 59 percent said that less than 10 percent of their online purchases eventually become gifts.

These figures, said Jupiter analyst Nicole Vanderbilt, demonstrate how e-commerce sites can expand their sales range by converting what she considered "self buyers" into gift buyers.

"While online retailers have been successful in capturing dollars that consumers spend on themselves, they have been unsuccessful in getting the majority of those same customers to spend their gift dollars online," Vanderbilt said in a statement.

Similar to what many other analysts have observed about portal strategies, the study also recommended that e-commerce sites should not limit their marketing efforts only to attracting new customers. Rather, e-commerce sites also should concentrate on increasing customer loyalty by borrowing a few pages from the offline retail world's playbook. For example, companies could introduce gift registrations as a way to develop loyalty while converting buyers at the same time, Vanderbilt said.

As the population of Netizens increases, Internet properties such as portals have turned to e-commerce partnerships as a way to convert passive Web surfers into active Web shoppers. Though many popular portals--such as Yahoo, Excite, and Lycos--have profited by building loyal audiences using email, instant messaging, and search, e-commerce also has become a crucial revenue stream.

As a result, many portals now are turning their emphasis toward e-commerce, modeling their efforts after the success of companies like Amazon.com.