Relation between clicks and bricks is silver lining to ho-hum holiday sales - online efforts of retailers

NATIONWIDE DSNRT REPORT -- Continued growth of online sales may have been one of this past holiday season's bright spots, but subtle e-commerce developments of another sort were actually more significant.

During November and December, it became apparent efforts by bricks-and-mortar retailers to more tightly integrate their online efforts with conventional store operations were being effective. In doing so, they have moved closer to fulfilling the potential of the highly touted bricks-and-clicks business model.

"It is clear that bricks-and-mortar retailers are committed to having an online presence that is integrated with their physical presence in a meaningful way," said Russell Jones, a vp in the retail practice of Cap Gemini Ernst & Young.

Several striking examples from the past holiday season involved Target, Wal-Mart, Sears and Circult City. In the category of most extensive use of a conventional advertising medium to promote a creative e-commerce initiative, the award would have to go to Target. The company devoted four pages of a 32-page circular that ran in Thanks-giving Day newspapers. The insert extended from the circular and across the top Target in-quired "Can't wait to save? Go to target.com."

Twenty-one items were featured, and to create a sense of urgency, the prices were good only on Thanksgiving. As an added bonus, if the order was for more than $50 and paid for with a Target Visa shipping was free.

Wal-Mart devoted less real estate in its Thanks-giving weekend circular to online retailing, but the featured promotion illustrates the integration point just as effectively Wal-Mart appealed to the insecurity 01 potential jewelry buyers with this headline across the bottom third of a page: "Learn how to buy a diamond at Walmart.com" that encouraged them to visit the site's jewelry learning center.

Sears and Circuit City took a different approach. Both offered online customers the option of picking up merchandise at stores. On Nov. 28, Sears announced a service that allowed customers to see whether items purchased online were in stock at a local store. They could pick up the merchandise at the store. According to Sears, "In many cases, the product may be picked up the same day as ordered."

The benefits of tighter integration are becoming apparent in the volume of people visiting the Web sites of conventional retailers. During November, seven of the top 15 e-commerce sites identified by Nielsen/NetRatings were operated by conventional retailers, including Toys "R" Us, Barnes and Noble, Best Buy, Wal-Mart, Sears, Target and JCPenney.

On Dec. 11, Circuit City, announced an arrangement with Amazon.com, allowing consumer electronics items offered on Amazon to be picked up and returned to its stores.

"Steady traffic to many bricks-and-mortar sites indicates consumers are researching online with the intent of buying in the actual stores, highlighting the need for retailers to integrate their online and offline operations," said Jupiter Media Metrix research analyst Jared Blank.

Integration is only part of the story, though. The online efforts of bricks-and-mortar retailers have also improved considerably. "We've seen huge improvements in the way Web sites work, and these improvements have made it much faster, easier and more fun to shop online," said Mary Humphrey, director of e-commerce at AOL. "Online shopping is becoming more mainstream, and one of the key reasons is the timesaving convenience. You have the ability to find anything you want without the hassle of parking lots and lines."

The mainstream nature of online retailing was illustrated by a survey commissioned by the International Mass Retail Association in early December. The survey of 1,000 people found 627 people had Internet access, and 54% of them used it as a tool to find product information. Their second most prevalent use, mentioned by 39% of respondents, was to see if a store carried a specific item. Buying products was mentioned by 38% of those surveyed.

Despite the improved Web sites, tighter integration and consumers overall happiness with purchasing online, online sales growth has begun to slow from prior-year levels. Goldman Sachs analyst Anthony Noto's estimate for full-year 2001 online sales of $32.2 billion represents a 20% to 25% increase from 2000, when sales increased 68% from 1999.

"Our survey indicates consumers are only marginally shifting spending online," Noto said. "Respondents indicate their planned holiday budget allocation of online spending for 2001 would only be modestly changed in favor of shopping online, compared to 2000."

Those surveyed by Goldman Sachs indicated 14.8% of their holiday budget would be spent online, as compared with 12.4% last year. An even larger percentage of next year's holiday budgets likely will be spent online, especially if bricks-and-mortar retailers continue to improve online offerings and make them an integral part of their overall merchandising, marketing and operations strategies.