On-line shopping tempered by budgets

Some growth being seen but high rates of the past won't materialize, some experts say.
By VERNE KOPYTOFF
SAN FRANCISCO CHRONICLE
When Karen Massa shops for Christmas, she does so in front of a computer rather than at the mall. E-commerce has freed her from fighting the crowds and lugging gifts to Virginia because she has them shipped ahead to her mother's house.
Massa's shopping preference is hardly an anomaly these days. Legions of consumers will turn to the Internet this year, spending more than ever.
"For the last two years, I've done almost all my shopping online," said Massa, West Coast recruiting manager for a San Francisco law office. "It's increased every year."
Analysts expect e-commerce to grow substantially this holiday season. But they don't anticipate the extraordinary rates of some past years, because of the industry's maturity and tight budgets in many U.S. households, according to Forrester Research.
20 percent growth
Online sales between Thanksgiving and Christmas are expected to grow 20 percent to $13.2 billion, Forrester predicts. That's down from 31 percent growth in the preceding holiday season.
Companies are nevertheless enthusiastic. Most prominent retailers have overcome their early missteps on the Web and become profitable.
The kinds of products that shoppers buy online have gradually expanded since the early days of e-commerce, when consumer electronics and computer hardware dominated.
Last year, apparel vaulted to the top category in terms of dollars spent, according to the holiday eSpending Report, compiled by Goldman Sachs, Nielsen/NetRatings and Harris Interactive. Clothes have gone from being a problem for some retailers because of the high cost of warehousing and shipping to a major source of sales. In a sign of the category's ascendancy, Sears.com started selling clothes for the first time this year.
Walmart.com returned to selling apparel this year after shuttering that department in 2001.
"From the time we took it offline to the time we took it back, we listened to customer feedback and tried to understand our customers better," Amy Collella, a spokeswoman for Wal-Mart's online operations.
Only 5 percent overall
E-commerce comprises only about 5 percent of overall retail sales, according to analysts. Many people still prefer to shop in stores to see gifts before they buy them and for reassurance that they can return them if necessary with minimal hassle.
Others simply do their research online to compare prices before going to a bricks-and-mortar retailer.
Free shipping has become a staple of online shopping over the years. More recently, Web sites have given the bonus only to shoppers who spend over a certain amount, such as Amazon.com, where the minimum is $25, with some exceptions.
Lauren Freedman, president for the E-tailing Group, a Chicago e-commerce research firm, said it is too soon to know how widespread the free shipping offers will be this year.
She said that if they do come, they will probably kick in after Thanksgiving.
The same goes with product discounts, another way Internet retailers lure customers.
However, Freedman noted that there is some indication retailers are more selective this year than in the past.
Many merchants, like Macys.com and FTD.com, are offering reduced prices that are announced only to registered users by e-mail and for only a few days. If the shopping season starts slowly, however, retailers could be forced to cut prices more publicly, Freedman said.
Broadband spread helped
The spread of Broadband to about half of all Internet connections in the United States is helping change the face of online shopping. Shoppers with Broadband shop more frequently online and spend more.
Some online retailers are reacting by offering more audio and video that would otherwise be too cumbersome for visitors to download through dial-up connections.
Most notably, last week, Amazon.com's home page started offering five free short films starring well-known Hollywood actors. While not traditional advertising, the films include products that viewers can buy during the closing credits.
Online shoppers appear to procrastinating more each year. The peak in sales keeps getting later, according to a study by Atlas DMT, an advertising technology firm.
Three years ago, online shopping peaked around Dec. 1. Last year, the busiest day was Dec. 15.