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
ON THE NET
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
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
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
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
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
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