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msnbc.com
updated 12/14/2004 3:54:45 PM ET 2004-12-14T20:54:45

Walmart.com, Bestbuy.com, Target.com — the names don’t exactly sound like titans of the e-commerce age, but with the online holiday shopping season now hitting its peak, the latest performance data show these offline brand names are outshining their Internet-only rivals.

According to data from Reston, Va.-based Internet consultant comScore Networks, an analysis of the online sales performance of 25 major national retailers shows aggregate online spending is up more than 50 percent from the corresponding days last year, more than doubling the performance of the overall Internet-based retail sector.

The reason for the standout online performance: Many of the nation’s best-known brand names from the offline world have made significant strides in developing their online businesses in recent years, launching major site redesigns and offering a wider array of product categories notes Graham Mudd, a senior analyst at comScore.

“Basically, the big-name retailers have finally got their act together online,” said Mudd. “They’ve done a good job of integrating all their channels — the Internet, their stores, advertising, marketing and catalogs — and they have really improved the ability to do research for a product on their sites, so there’s much more flexibility for the customer.”

While offline retailers are seeing a strong year, analysts say it would be misleading to suggest that “pure play” Internet retailers — those that only operate online — are struggling in comparison.

While Web retailers like Pets.com and Boo.com, once hailed as the Internet retailers of the future, have since imploded, others like Amazon.com are still going strong, and like their offline rivals they are learning to use new channels, like catalogs, to woo their customers.

But big-name retailers like Wal-Mart and Best Buy are gaining on their Internet-based rivals by developing a holistic approach to retailing, integrating their “bricks and mortar” stores, catalog businesses and Web sites to create a continuous shopping experience for consumers across all channels.

The buzzword: Multi-channel
Indeed, the buzzword for this year’s e-shopping season is “multi-channel,” notes Mike Grandinetti, a senior vice president at Yantra, a firm based in Tewksbury, Mass., that develops e-commerce software for big-name retailers like Best Buy and Circuit City.

“Retailers realize that, although you might want to do your research for a product online, you might also want to go to a store to examine it, especially if it’s an expensive product like a flat-screen television,” Grandinetti said.

The idea is to create a set of services that will foster a sense of loyalty with the customer, Grandinetti said, and so retailers are beefing up their product search capabilities, and they are developing systems that allow customers to order a product online, and then pick it up, or return it, at a physical store. “The leading retailers are finally embracing this, and it’s one of the hottest trends in the software industry right now,” he said.

Online consumers appear to be responding. Helping the performance of the big retailers this holiday season has been a strong desire on the part of Web shoppers for the sorts of products “big box” retailers offer, including apparel, furniture, garden products and home appliances.

“The combination of online and physical stores is the right combination for retailers, and that’s something we’ve been saying for a long time,” said Adam Sarner, an e-commerce analyst at technology research firm Gartner.

“The Web as become a huge influence for consumers’ transactions,” Sarner said. “People do research online, and then go to a store to buy, so sales are being driven to stores from Web sites, and that’s not always something that’s considered,” he said, adding that some 25 percent of all retail sales are influenced by a retailer’s Web site.

“We’re never going to get to a point where the physical store gives way to the Web presence. We tried that in the late nineties and it didn’t work,” said Sarner. “But the Web has become part of our regular way of buying stuff and we could see more balance here, and so there could be stores where there is more online activity that offline activity.”

Bright spot for 2004
Four years after the Internet bubble burst, online retailing continues to thrive, and this year it is expected to be the strongest sector of a relatively uninspiring holiday shopping season.

Web retail is expected to grow at a healthy pace in coming years, too, as consumers take advantage of increasingly sophisticated online search functions, which allow for easy comparison shopping and bargain searches. The 24-hour availability of online shopping, coupled with the prevalence of free shipping, in-store pick-ups, more realistic Web graphics and greater use of broadband connections is also likely to drive growth, analysts say.

With more than half of all the online spending that will take place during the holiday season already complete, comScore estimates that the peak day for online holiday shopping took place late last week, or will take place early this week. The biggest online shopping day of 2003 was Dec. 9, when online retailers rang up $428 million in sales. This year's peak shopping day is expected to see sales of more than $500 million comScore said.

Compared with sales at traditional retail stores, Internet shopping is expected to grow strongly this year, albeit at a slightly less torrid pace than last year’s 30 percent growth rate.

Online holiday spending, excluding spending at travel and auction Web sites, came to $8.41 billion in the period between Nov. 1 and Dec. 5, up 23 percent from the same period a year earlier and on track to meet this year’s estimates according to comScore.

The overall spending forecast for this year’s holiday season from comScore, which covers the months of November and December, is for online sales of up to $15.5 billion, which represents an increase of as much as 26 percent from the same period last year.

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