How'd They (E-Companies) Do?

The Douglas Firs are long gone, the bells and bulbs back in their boxes. But experts are still unwrapping the fortunes and failings of electronic commerce--the economic centerpiece of this past Christmas--in an ongoing critique of the first true e-holiday.

Yes, lots of people shopped online in 1998. Quite a few did even in 1997. But it wasn't until the final months of 1999 that transaction by mouse shed its novelty status and "dot-com" became part of the consumer lexicon.

The number of consumer e-commerce sites had multiplied tenfold in 10 months while the marketing machine went into overdrive, flooding the airwaves with ads (and making broadcast radio and TV networks arguably the season's biggest winners). An estimated 26.4 million Americans shopped online between Thanksgiving and New Year's, and total online sales reached $5 billion, treble those of 1998, according to Forrester Research of Cambridge, Mass.

All things considered, the 1999 holiday season "was an enormous success," says Allen Weiner, vice president of analytical services at NetRatings, an e-commerce tracking firm. Jill Frankle, director of retail research at Gomez Advisors, agreed. An online poll her firm conducted the week after Christmas that showed 86.2% of online shoppers were at least somewhat satisfied with their experience; 46.5% were very satisfied, 25.7% were satisfied, 14% only somewhat so. Less than 2% of the 1,000 survey respondents said they would never shop online again.

Congratulations would be a waste of time, however. Some of those "satisfied" shoppers may have been willing to put up with a few snags because they were spared a trip to the mall. After all, the leading reason people shop online is to avoid crowds. More important, today's online shoppers have seen what a three-year veteran like Amazon.com can do. They recognize a good site and good service. And they will expect the same and more from everybody else. E-tailers who want to survive long-term will have to do better. Much better.

Here's how.

MARKETING MANIA

One of the most common mistakes made by e-tailers eager for a piece of the 1999 holiday market was advertising overkill. Some spent lavishly to build their brands and drive people to their website but then short-changed the rest of the operation. The result: misplaced orders, late deliveries and some unhappy customers. And much of the marketing millions spent after Nov. 1 probably drowned in the sea of other dotcom ads. "Many e-tailers spent way too much money way too late in the season," Weiner says. Toy seller KBkids.com did things right, launching its $43 million ad campaign at the time of the site's July debut. The payoff: traffic and sales soared.

Though Toysrus.com did more business than KBkids, it provided the season's best examples of what not to do. One of its mistakes was to do heavy-duty holiday marketing before it had the infrastructure in place to back it up. The site got slammed and spent most of the season scrambling. "The lesson here is, don't try to launch four weeks before Thanksgiving," says Paul Bates, vice president of research at e-commerce tracker BizRate.com "You can't learn how to be an e-tailer from soup to nuts in the amount of time that they gave themselves. It's too aggressive."

WHAT'S OFFLINE MATTERS