Online Retail Sales Could Double This Holiday Season

Experts predicted last week that fourth-quarter online retail sales will double compared with last year.

The forecast, by Gomez Advisors Inc., an electronic-commerce benchmarking firm in Lincoln, Mass., estimates that online retail sales during the fourth quarter will reach $11.4 billion, more than double the $5.2 billion in sales reported by the U.S. Department of Commerce during the same period last year. This year's growth will be driven by an increase in the number of people who view the Internet as a valuable shopping tool, according to Gomez. It will also be fueled by companies' efforts to improve service - particularly order fulfillment - for existing online customers, the study found.


Lack of Privacy Policies Impedes E-Retailers

Lack of clear-cut, understandable privacy policies could be the biggest impediment to online retailers this year as they gear up for the hectic fourth-quarter holiday buying season.

A new study released last week by Cambridge, Mass.-based Forrester Research Inc. and Vividence Corp., a San Mateo-Calif.-based company that specializes in evaluating Web sites, found that the more satisfied online buyers are with a Web site's privacy policy, the more comfortable they will be when they shop at that site.

The Forrester study, "Web Buyers Speak Out About Privacy Policies," surveyed 400 Web buyers and analyzed their attitudes toward online privacy on eight major retail sites. The study evaluated the privacy policies of,,,,,, and

The Web buyers rated each site's privacy policies from zero to 100, based on the ease of locating the policy, their overall satisfaction with the policy and their comfort level in shopping at the site after reading the policy. At least five of the sites received "mediocre" scores of between 60 and 76 because of policies that were difficult to understand or failed to explain terms and principles. The site that received the lowest score, a 39, used a text link that blended into the site's background and made the policy hard to find.

Although Forrester didn't identify the names of the Web sites that earned the mediocre or poor scores, the firm did announce that two of the eight sites, and, finished ahead of the rest in all areas evaluated.

Marc Rotenberg, executive director of the Electronic Privacy Information Center, an online privacy watchdog group in Washington, called online privacy the "No. 1 consumer issue." He said online merchants have to do more to convince consumers that their private information won't be misused. "The policies generally are very weak," said Rotenberg. "People still don't trust that their information is not going to be abused."


Bob Smith, executive director of, a trade group of online retailers, said he doesn't think Gomez's prediction is unreasonable, and he downplayed the impact higher fuel prices could have on consumer spending in the months ahead. However, fulfillment is a "top-of-mind" issue for all online retailers, said Smith. "Companies are very aware of what they need to do and that delivery on time is not only critical for satisfying the consumer, but getting the consumer to come back," he said.

Most companies this year have increased their investment in inventory planning, inventory management and merchandising, Gomez said. In fact, 81% plan to have real-time inventory management during the upcoming holiday season, according to the study.

Last year, many big electronic retailers got hammered when they entered the holiday buying season unprepared to handle the huge spike in online orders. As a result, the Federal Trade Commission fined seven major retailers, including Inc., CDnow Inc. and LLC, $1.5 million each for not delivering orders on time. "Companies have a better feeling and more responsibility for getting products to the customers at the right time this year," said Barrett Ladd, an analyst at Gomez. "Many of the top toy firms have brought their fulfillment operations in-house, whereas last year they outsourced them," said Ladd.

The forecast by Gomez follows a similar study released last month by Boston-based research firm The Yankee Group, which predicted that online holiday sales would reach $9 billion this year. Yankee Group officials couldn't be reached for comment, but Ladd said the difference between the forecasts is likely due to differences in the types of companies and services included.

Copyright © 2000 IDG Communications, Inc.

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