Transport crisis may put dot.coms on line for Christmas boost

By Nigel Cope

Will the rail crisis and the grim weather make this a dot.com Christmas? According to a study by Ernst & Young, increasing numbers of shoppers will avoid town and city centres this Christmas to shop either via catalogue or online. Its annual global internet retailing study shows that UK consumers plan to spend 23 per cent of their total Christmas purchases over the internet, up from just 14 per cent a year ago. Two thirds of online shoppers will do some of their Christmas shopping online, with 19 per cent going online for more than half their gifts.

Will the rail crisis and the grim weather make this a dot.com Christmas? According to a study by Ernst & Young, increasing numbers of shoppers will avoid town and city centres this Christmas to shop either via catalogue or online. Its annual global internet retailing study shows that UK consumers plan to spend 23 per cent of their total Christmas purchases over the internet, up from just 14 per cent a year ago. Two thirds of online shoppers will do some of their Christmas shopping online, with 19 per cent going online for more than half their gifts.

According to Simon Burke, chief executive of Hamleys, the toy retailer, the downturn in central London is already evident. Mr Burke reckons customer numbers in the capital are down by about 10 per cent as shoppers give up on trains and become frustrated at worsening road congestion. He says there is also a noticeable switch to shopping on Sundays instead of Saturdays as consumers seek to beat the traffic levels. Customer numbers in the middle of the week are also under pressure as more people drive to work.

The internet fraternity could certainly use a boost. After months of plunging share prices and an avalanche of negative sentiment business-to-consumer firms desperately need this to be a dot.com Christmas to shore up crumbling finances. Things can surely be no worse than last year, which saw letsbuyit.com deliver Christmas trees in January; Argos turn customers away due to fulfilment problems, and ToysRUs face stock shortages after under-estimating demand.

Woolworths has already delivered an early Christmas cock-up after running into delivery problems. Faced with bigger than expected demand Woolworths has been forced to admit that it can't guarantee internet and phone orders will be delivered within three days. It has been forced to change the guarantee to 10 days instead and bring forward its deadline for guaranteed deliveries before Christmas to 9th December. Woolies's woes have even merited a mention in the BBC's Watchdog programme.

EToys, the specialist online toy retailer, has doubled its online product range to 10,000 items and increased its warehouse capacity to handle the bulge in orders. James Bidwell, marketing director of eToys Europe, says the run of dot.com failures will lead to consumers choosing only well known brand names this year.

Letsbuyit.com, the site which enables consumers to club together to buy at bargain prices, says it has made considerable improvements to its systems this year though admits they are still not 100 per cent effective. With the help of Sykes, its Nasdaq quoted delivery partner, Letsbuyit has guaranteed that anyone ordering one of its top 100 products will be guaranteed to receive their purchases before Christmas as long as they are order before 16 December.

Amazon.co.uk says its Christmas has got off to a good start. Steve Frazier, chief executive, says average order sizes are up with more mixed orders showing that customers are ordering more than just books.

So far, so good then. But it's early days yet and after last year's problems online retailers have much to prove.

There was a rare piece of good news for the dot.com fraternity last week when new figures from the Internet Advertising Bureau showed an explosive growth in online advertising. The downside was that the figures only covered the six months to the end of June before the internet world started to go a bit pear shaped.

Even so the figures were impressive. They showed a 266 per cent increase in online advertising to £63.4m in the first half of this year compared with £17.3m in the same period of 1999. One landmark is that online advertising now has a larger share of UK advertising spend than cinema.

The IAB research, conducted in conjunction with PricewaterhouseCoopers, also showed a loosening of the stranglehold on the market by the most popular websites and portals. Last year, the top 10 UK sites accounted for 90 per cent of the advertising revenue against 85 per cent this time. The IAB is also pleased that major consumer goods companies such as Unilever and Heinz are starting to spend online.

Even so the figures are tiny. According to figures compiled by the Advertising Association and Zenith Media, the £63m spent online in the first half compares with £8.3bn spent across all UK media in the first six months of this year. That puts the internet's share at less than 1 per cent.

More uplifting for the dot.coms that are still relying solely on advertising for their revenues is that Zenith predicts this share will rise to 4 per cent in the next couple of years, roughly equivalent to poster advertising's share. However, for some struggling dotcommers that must seem like a lifetime away.

n.cope@independent.co.uk