Leading retail brands such as Amazon, along with Woolworth and Tesco in the UK, have reported strong sales growth over the Christmas period. However, reports suggest that the most successful companies this Christmas were the bricks and clicks companies and not the Internet pure-plays. On balance, the dotbams look most likely to flourish in the New Year.
'Tis the season to be merry, especially if you're a dotcom looking for good news. This Christmas season saw some excellent online trading figures.
A number of top eTailers experienced strong growth in online sales in the run up to Christmas 2000. In particular Amazon managed to beat its records. It delivered 15 million more items this Christmas than in 1999. In the UK its Christmas sales doubled to three million items. Interestingly, electronic goods such as DVD players and mobile phones were more popular than the more traditional books and music. Other UK retailers like Tesco.com and Woolworth.co.uk also did well. Tesco was logging 60,000 orders per week towards Christmas and Woolworth said that online shoppers often spent more than they would in their stores.
Despite these encouraging results, the number of high profile dotcom failures in 2000 suggests that there is no room for complacency among eRetailers. Without the guarantee of further injections of venture capital, many Internet pure-play companies are being forced to scale down their marketing budgets and cut costs in a drive to reach profitability. With these budget constraints in mind, new customer acquisition becomes increasingly challenging.
However, traditional retailers - the so-called dotbams - can use their high street store networks to promote their online brands to their existing customer base. Retail outlets can serve as customer service centers for goods purchased online. In addition, many customers, concerned about online payment security and delivery, still prefer to purchase gifts through traditional channels after browsing for ideas on the Internet.
It is clear that the human touch is still important. As customer confidence with online purchasing grows, many traditional retailers are in a strong position to retain and build their customer relationships in the online space. The pure-play dotcoms are not out of the doldrums yet. Letsbuyit.com is the latest dotcom to face financial difficulties. It is in desperate need of further cash to pay its creditors, despite predictions of substantial increases in fourth-quarter sales.
If recent trends continue, the traditional retailers with a solid customer base, popular brands and sufficient cash reserves will be most likely to succeed in 2001.