Online Holiday Traffic Peaked Early Due to Shipping Concerns

Fulfillment lessons will carry into Christmas 2000

Holiday shoppers in 1999 weren't procrastinators.

Online holiday shopping peaked Dec. 12 -- three days earlier than observers expected -- amid consumers' concerns that their orders wouldn't get filled in time, according to Nielsen NetRatings Inc. in New York.

"Fearful of delivery logistics, surfers caused a noticeable drop in the traffic the week before Christmas," said Peggy O'Neill, an analyst at Nielsen NetRatings, which counted 17 million unique online shoppers Dec. 12.

Early returns from industry watchers show that the big winners in the holiday shopping season were those that had weathered a strong holiday season in the past, according to Mike May, an analyst at Jupiter Communications Inc. in New York. Amazon.com, eToys.com, Landsend.com and Gap.com all handled orders and fulfillment well, he said.

"The clear losers were sites that weren't able to control their own fulfillment" and relied on outsourcing or drop-shipping from manufacturers, he said.

Others underestimated the impact of their marketing initiatives. Petopia, Sharper Image Corp. and Toys R Us' online unit are among the retailers that have experienced problems (News, Nov. 15).

Plano, Texas-based J. C. Penney Co. has seen its online traffic climb and e-commerce revenue increase from $14.5 million in 1998 to between $75 million and $95 million in 1999, said Ron Hanners, the company's executive vice president of Internet retailing.

This holiday season, the site attracted about 2 million visitors per week and processed 2,000 to 10,000 transactions per hour, Hanners said.

To accommodate all the traffic, J. C. Penney beefed up its site architecture from a single commerce server 14 months ago to 48 servers, Hammer said.

But from front to back, a transaction touches on about 60 points throughout J. C. Penney's systems, Hanners said, and that complexity has resulted in "momentary challenges" during times of peak stress on the company's point-of-sale terminals, catalog call center and Web site. All of those feed back to the same mainframes, for instance.

Overall, no site was immune to temporary snafus, but observers said the biggest lesson companies will carry into the next holiday season will be to focus more on fulfillment than on advertising.

"It's better to control the number of customers that visit your site and surprise and delight every one of them than it is to open the floodgates and irritate every other customer that comes to your store," May said.

Copyright © 2000 IDG Communications, Inc.

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