Reuters--Online holiday sales in November and December will grow 33 percent from 1999 to $11.6 billion in 2000, but online retailers will spend far less money on advertising this year than last, according to a report by New York-based Jupiter Communications Inc., a provider of research on Internet commerce.
While Wall Street's fondness for online retailers has abated, consumers will continue to spend more money online and consumers who are already online buyers will allocate a growing share of their holiday budget to online merchants, the report found.
Travel will account for $2.6 billion and retail will account for the remaining $9 billion of online holiday sales.
However, online retailers will spend far less money on advertising this holiday season as they abandon many of the "expensive, misconceived" television ad campaigns during the holiday season of 1999 and opt for more cost effective and performance-based means of online advertising, the report said.
Many online retailers have gone out of business because they overestimated the markets that they hoped to sell into.
The key to retailers' success this holiday season will be to stay within a targeted geography and product area rather than overextending themselves, Jupiter said in its report.
They should focus on the customers who do not need to be convinced of the merits of the product but only need to learn where they can find it. These customers can be acquired rather inexpensively through intelligently targeted marketing campaigns.
Selling beyond the natural capacity of its market is not impossible, but a retailer must be able to spend heavily to convince the incremental customer of the merits of the product in question, Jupiter said.
However, in the current environment of tight financial markets where it is difficult for Internet companies to tap additional financing, Jupiter said catering to natural markets will let retailers control costs.
Traditional, or brick and mortar, retailers are finally beginning to make the necessary investments and striking the right partnerships that will allow them to compete effectively, Jupiter said in the report.
, Newsday. September 25, 2000
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