Underneath the surface of online retail sites and delivery modes is the retail calendar, marching along to the beat of what customers want when they want it. So how much has really changed?



By Joe Gold, Senior Editor

Seasonal variations are familiar to traditional retailers. Factors such as the weather, holidays and the school year affect sales. While they shed some light on our path, we will find that the brick-and-mortar does not always correspond to sales online. It may well be where the two diverge that we find the most informative.

Online where the world is new, we have no traditions to fall back on, no wizened warriors. We have only the traditional retail cycles as our guide. But how do those retail seasons affect sales on the Web?

We can start with United States figures, because worldwide American sites are the biggest draw for now. But we can expect Europe and Asian to grow in e-tail weight soon, with the rest of the world getting with the program as technology filters down to less developed areas.

Toy and gift categories led e-Christmas 1.0 to a $7 billion online spendfest. That’s hardly a surprise. Christmas is the one uptick at the end of the year that affects nearly every product category.

HardwareStreet.com in Reno, Nevada, has a mixture of business and consumer audiences, relying heavily on affiliate group marketing focused on business groups. but also college students and seniors explains Paul Terrell, vice president for merchandising and procurement. He said that being a newcomer to the channel has its disadvantages, especially at inventory crunch time. His Christmas was up 10 percent over 1998, "but we ran into supply problems. That drove us to create a multi-distributor model with the big five national distributors. It wasn’t price, but availability that was our number one concern. Zero inventory doesn’t do anybody any good."

Terrell thinks part of the problem that left HardwareStreet.com with a huge backorder is that "distributors are inclined to allocate scarce inventory to their traditional best customers, the brick-and-mortar retailers. It’s important for us to build the HardwareStreet brand to get enough product allocated in the future."

Follow the yellow brick calendar

The retail rhythm of the year is fairly consistent. Regardless of the year, retail trade figures from the U.S. Census of show that while sales figures have been increasing over the past several years, the month-to-month variations remain fairly constant from one year to the next. Over a year’s total retail sales, January and February have consistently around 88 percent of the norm, March and April come close to the mean, with May through August slightly above 100 percent of the average, with slight dips in September and October before the November increase which reaches a 120 percent peak in December.

Of course, product different categories have slightly different seasons. Automobile sales start at just 86 percent of an average month in January, move to above average in March and remain there through August. While retail in general increases at year-end, automotive sales taper off.

Apparel and accessories show the largest month-to-month variations, starting the year at 73 percent of average, hovering just below the annual average from March through July, then bouncing up to 108 percent for August back-to-school purchases. This category hovers at 96 percent in September and 97 percent in October before taking off for the holidays at 113 percent in November and rocketing to 159 percent in December.

The U.S. Census category that comes closest to online shopping is nonstore retailers, which includes catalog sales, telemarketing, QVC television and yes, e-tail. For 1999, nonstore sales averaged $8.96 billion a month, with January and February at just 83 percent of an average month, and March through August staying just below the average before it reaches 101 percent in September and October, climbing to 120 percent of the norm in November and kicking serious e-tail at 143 percent of average for December.

With calendar in hand, we might have predicted that online jewelry, flowers, chocolate and e-greetings would score a big blip on Valentine's Day. Forrester Research estimated Valentine’s Day 2000 would be worth $400 million and called it the e-tailer’s second most profitable holiday. Nielsen//NetRatings noted that it was the niche stores, especially gift stores that had a 55 percent increase over normal traffic and lingerie up 78 percent led by Victoria’s Secret. BizRate pegged holiday Valentine’s Day spending this year at $642 million, adding the juicy tidbit that 32 percent of men and 29 percent of women buy more intimate Valentine offerings that they would never buy offline, given the tasteful anonymity of the online purchase. Offer products where anonymity makes buying easier—drugstore sites come to mind—and you appear to have an advantage online.

Tax time in the U.S. starts at the beginning of February when W-2 forms arrive, then settles down until building for the April 15 filing deadline. That’s a big time for tax software. Subsequent tax refunds fuel further purchases, online and otherwise. What will sell online for Mothers Day? Bet on e-greetings, more flowers, more chocolate. Spring will be a good time for automobiles, summer for travel. Dads and grads will have their days, and in fall back to school will still rule retail, online and otherwise.

But then there’s Presidents’ Day. This is not a holiday known for gift-giving so much as department store sales. Brick-and-mortar retail promotions appear to be based on a day off work for a trip to the mall. So while Presidents’ Day may be big at Macy’s and the mall, we found no corresponding blip in online sales for that day. Still, available shopping time is a factor. Early data suggests that Saturday is the most popular day for online consumer purchases.

But sites that cater to the business trade—office supplies come immediately to mind—rely on Monday through Friday for the bulk of their business. Hardware and software are more consistent through the year, keeping with the flatter profile of business buying. Sites that emphasize computers and software and business-oriented. While Christmas is a factor even here, the rest of the retail calendar appears so far to have little impact on sales.

At Computers4Sure.com, Pieter Coenraad is the director of database marketing. "The fourth quarter is the usual explosion," he says. "Usually the first quarter levels at where November was the year before. We see a steady decline into the third quarter. But in a growth situation, a steady decline can actually be static." The ever-changing home page "always has a store that addresses seasonality, whether it's Thanksgiving, Christmas or the other holidays. For trends like back to school, we modify our homepage to offer hot products."

The fact that all this is happening in prosperous times—prosperity due in part to the growth of e-commerce—may also be affecting the seasonal sales patterns. It could be distorting the seasonal effect. In flush times, consumers with money in their pockets may jump at an excuse to buy a Valentine’s Day offering.

Inventory and promotion

Jim Kalasky, an analyst at Levin Consultants office in Portland, says that following seasonality is important, "not only to plan where sales come from and to plan promotional activity, but also to have enough inventory. While brick-and-mortar retailers need to distribute to stores, virtual inventory falls on the distributor. As e-tailers grow, it will become more important to provide distributors and major partners with provide forecasts to allocate inventory."

Without a firm baseline, inventory was a concern for several e-tailers over the holiday season. The data that e-tailers build this year will be the template for the future. Kalasky says one result is being able to predict inventory requirements to avoid expensive mistakes, whether overstocking or running out of merchandise.

Tiger Direct has been marketing hardware and software through catalogs and now the Web for 12 years to an audience of higher-end consumers and small business. "The fourth quarter and first quarter are our best times," said catalog manager Bruce Matthews. "The second quarter is slow, and the third quarter builds back up to the fourth quarter."

Inventory projection was precisely what hurt Tiger Direct. Slow sales in mid-November seemed to indicate a less-than-merry sales report for Christmas. Tiger ordered less inventory to avoid an overstock. But the factor they hadn’t considered, Matthews said, was that customers shifted buying from catalog to the Web, and in the process they placed their orders two weeks later than normal. "This past year the majority of our sales came in first two weeks in December. The heavy sales period usually starts in mid-November," Matthews said. "That slower start proved deceptive. When people order online, they are waiting longer, trusting overnight delivery. Our number one concern is having inventory when the rush comes."

The market segment matters, too, Kalasky says. "Businesses purchases are not impacted by holiday seasonality. Budgets are planned around the fiscal calendar. January is a good month because it’s first month in their quarter, and businesses can spend their newly-allocated dollars. He notes that the Y2K concerns at the end of 1999 may have borrowed dollars from what might have been bigger first-quarter budgets.

The global perspective

Those results apply for American e-tailers selling to American customers, especially to homes and small businesses. Buyonet, a Swedish pure-play e-tailer, is more globally oriented, and it shows in their seasonal patterns.

"When you spread out over the world, the seasons definitely don’t have as much of an impact. Most companies that sprawl out over the world see a leveling out of the seasonalities and the cycles," says David Bowman, vice president for business development.

In his last company that served primarily American customers, Bowman saw much more fluctuation. "We saw spikes for every little holiday Valentine’s Day, St. Patrick’s Day, Easter, Thanksgiving and obviously Christmas." In Buyonet’s global audience, the U.S. is only 30 percent of the overall picture. "The graph is flatter, more manageable and predictable."

The Americans have led the charge, but the rest of the world is getting in on the game. As the Web grows more world wide, look for that flattening of the seasons to be a growing factor.


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