Holiday eSpending Soars

Rochester, N.Y. — Online shoppers during the just-completed holiday season drove sales in that channel 30 percent higher than last year to $30.1 billion, according to a just-released report.

The results from the fifth annual Holiday eSpending Report offered further evidence that Internet retailing is on a steady incline and high in the minds of time-starved, tech-savvy shoppers. Conducted in conjunction by Goldman Sachs, Nielsen/NetRatings and Harris Interactive, this study covered the shopping period from Oct. 29 to Dec. 23.

“Consumers continue to shop later in the online holiday season as their trust in on-time delivery grows,” said Anthony Noto, Internet and entertainment analyst, Goldman Sachs. “While 2005 holiday sales appear to be at the high end of expectations, continued heightened competition could hurt profitability.”

As might be expected, home textiles were not ranked among the top gift categories. The most popular category shoppers sought online this holiday was apparel at $5.3 billion, a 42 percent growth from the prior year. Computer hardware and peripherals ranked second in sales with $4.8 billion, but showed the strongest growth of all other categories with a 126 percent sales increase year-over-year. Consumer electronics, too, felt a healthy bump up in online sales, with a 109 percent increase, or $4.8 billion. And while more modest by comparison, a 66 percent increase — translating to $2.9 billion — was reported for the books category.

“The 2005 holiday season was a gadget year for consumers of all ages, and consumers continued to show their love for free shipping,” said Heather Dougherty, senior retail analyst, Nielsen/NetRatings.

While home textiles did not make this report's top five category list, Forrester Research Inc. in September released a U.S. e-commerce forecast that estimates the progress of retail sales for various product categories from 2005 through 2010. In it, Internet retail sales in 2005 hit $1.4 billion for linens and $2.6 billion for home décor/craft goods, which include accessories like rugs and decorative pillows. Online sales will continue to climb into 2010, the report says, with linens growing to $1.8 billion and home décor/craft goods reaching $3.9 billion.

In terms of shopping behavior online this holiday, the Holiday eSpending Report surveyed more than 1,000 consumers per week — totaling more than 8,600 people — on their spending habits, attitudes and motivations.

What was discovered was a shift. While traditional brick-and-mortar stores continued to hold the majority, or 68 percent in 2005, that rate dropped by 10 percent from the 2002 season.

Standing to gain was the Internet channel, which rose 11 percent, reaping 27 percent of total budgets this year from 16 percent four years ago, the report says.

Catalog buying remained steady at five percent this year, compared to six percent in 2002.

“E-commerce is gaining ground amongst consumers during the holiday season due to its convenience, product selection and lower prices,” said Dougherty. “Most importantly, holiday shoppers are diligent about finding the best price. The continued popularity of search engines, such as Google and Yahoo!, highlights the ease of researching product selection and availability, and with a longer shopping season, it was much easier to wait for additional price reductions.”