Online holiday spending surges

Rises 26 percent as shoppers gain confidence in Web operations; but free shipping could hurt margins.

NEW YORK ( -- Online retail spending surged this holiday season and for the first time ever will top the $100 billion mark for the entire year, according to a report Friday.

Consumers spent 26 percent more online during the 56 days before Dec. 26 in 2006 compared to 2005, according to comScore Networks, a digital research firm. The number excludes spending on travel.

In the week before Christmas, shoppers spent 38 percent more than they did in 2005.

"Consumers making purchases in those final days expressed both their faith in retailers' ability to pick and pack their orders in a timely fashion and shippers' ability to drop them on recipients' doorsteps in time for Christmas," Gian Fulgoni, chairman of comScore Networks, said in a statement.

The survey noted that retailers posting the biggest percentage gains in capturing online sales were traditional "brick and mortar" stores.

Candace Corlett, a partner with the consultancy WSL Strategic Retail, said traditional brick and motor stores were able to capture more of the market because they put resources into developing Web sites that are easy to navigate, made returning merchandise bought online easy, and, perhaps most important, joined other online retailers in offering free shipping.

But Corlett said eating shipping cost, while not nearly as expensive as adding extra store staff and the heavy holiday promotions retailers engaged in this year, could still hit profit margins.

"The January story is going to be margins," she said. "This is just another drain," although she was clearly not faulting brick and mortar stores for getting in on the online action.

ComScore said the top ten retail Web sites that brought in the most money were from:

1) Amazon (Charts)

2) Dell (Charts)

3) Yahoo (Charts)

4) Wal-Mart (Charts)

5) Ticketmaster

6) JCPenney (Charts)

7) Apple (Charts)

8) Best Buy (Charts)

9) Victoria's Secret

10) Circuit City (Charts)

The report said online retail spending now accounts for 7 percent of all U.S. retail spending, excluding food, autos and gas.

Overall retail sales were not as high this holiday season as many analysts had predicted.

Corlett attributed the lackluster results to high gas prices, which crimped consumer discretionary spending.

She said going forward, regular stores will need to create a more distinct environment to get customers off their laptops and into the mall.

"The in-store experience is going to have to be much more about the retail ambiance of the brand," she said, saying MAC, Anthropology and Coach do this well. "It's no longer just about the merchandise."


Online surprise: Penney, Sears gain on Amazon

Holiday tally: Retail's winners and losers Top of page