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Online retail celebrates early Christmas
Net sellers are doing their part to keep the economy moving toward recovery.
November 3, 2003: 11:40 AM EST
By Eric Hellweg, CNN/Money Contributing Columnist

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SAN FRANCISCO (CNN/Money) - The economy got some good news last week, when the third-quarter gross domestic product came in much higher than expected. A lot of the credit goes to consumer spending, which grew at a rate of 6.6 percent, the fastest pace since 1988.

It turns out that online retail did its fair share of moving product during the quarter. Thanks in part to the unusually strong third quarter, this is shaping up to be a record year for electronic retail -- not in the number of unique visitors or the average time spent on Web sites, but in actual sales. This year's holiday season started a little early for online retailers.

Need convincing? The electronic retail sector's total third-quarter revenue was up 51 percent from the previous year, according to a recently released report from Forrester Research. Forrester, which includes travel and auction sites in its retail estimates, says that given this strong third quarter, 2003 is on track to be the first year that electronic retail surpasses $100 billion in total sales revenue.

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"I didn't expect such a strong Q3, with the fickle economy, the war in Iraq, and zigzagging consumer confidence," says Carrie Johnson, a senior analyst with Forrester. "Our estimate for the entire year was $96 billion."

How about this: Amazon (AMZN: Research, Estimates) reported its first-ever non-holiday-season profit this past quarter on a 33 percent revenue gain. (The stock was hit after the company lowered guidance for next year, but it's bounced back since then.)

Jupitermedia, which doesn't include travel or auction sites in its online retail estimates, also sees this as a banner year for the category, though its 2003 total revenue estimate is just over half the Forrester estimate. Analyst Patty Freeman-Evans credits the retailers' efforts to improve consumer experience on their sites.

"The online retail community has spent the year improving its service," she says. "As a result, more consumers are planning on shopping online this year than last year." This year 39 percent of respondents said they planned on doing some or all of their holiday shopping online, up from 30 percent last year.

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So which categories are excelling? Both analysts cite apparel and health and beauty products as surprise standouts so far this year. Consumer electronics, however, is faring worse than previously predicted. Most of the year saw no new must-have electronics products, but investors should watch to see if the new Windows-based digital music players from Dell (DELL: Research, Estimates) and Samsung spike sales.

Investors, of course, shouldn't read too much into one strong quarter, and certainly enough "irrational exuberance" has crept back into the market lately. But with so much sentiment pushing stocks higher, it's reassuring to see quantitative proof of increased sales, and it does point to bigger and better things.

"Q3 is historically a weak quarter," Johnson says. "Customer spending held up, though, and Q4 is primed to be a good year-over-year growth story."


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Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.