• by October 11, 2000

The online retail market is expected to grow to $11.4 billion in sales this holiday season, approximately double the revenue for the same period last year, according to Internet quality measurement firm Gomez.

The anticipated growth during this holiday season will be driven by a number of key factors. Internet access continues to expand rapidly while an increasing number of consumers are turning to the Internet as a valuable shopping channel. In addition, the prominence of cross-channel marketing has continued to rise, especially with heightened online activity among traditional brick and mortar retailers and even branded manufacturers.

"This year is clearly the year of the multi-channel retailer as many existing, branded players realize that they can leverage their physical and catalog operations with an online offering," said Jill Frankle, director of retail e-commerce for Gomez. "Consequently, increased pressure is being put on the smaller players who have not yet built a strong company brand. Many pure dot-com players, especially those with highly seasonal offerings, are facing critical periods as this quarter will account for a significant portion of their annual revenues."

This holiday season promises to be a highly competitive one, as many companies have either entered the market or re-launched with online offerings that demonstrate improvement in site functionality and product selection.

Gomez's current research indicates that there has been increased investment in inventory planning, inventory management and merchandising. A preliminary analysis of Gomez's holiday survey indicates that 81 percent of retailer respondents plan to have real-time inventory management during the upcoming holiday season. Overall, online retailers have taken significant steps to ensure a positive shopping experience for their customers; some have sought service level guarantees from shippers and others are posting the dates after which orders cannot be guaranteed to arrive in time for the holiday. This quarter will flesh out those who have executed effectively versus those who are just not prepared.

"This holiday season differs from the 1999 online holiday season in that we are recognizing a dramatically reduced level in marketing spending directed toward customer acquisition. Instead, greater emphasis has been put on servicing existing customers, providing a superior online experience and safeguarding against many of the problems, such as fulfillment issues, that plagued retailers in the 1999 holiday season," continued Ms. Frankle. "Over the past year, investment has been directed toward customer service, fulfillment, and overall profitability".

Gomez will shortly be releasing its Holiday Shopping 2000 study, a survey of approximately sixty online merchants that examines preparedness for the 2000 online holiday season.