Christmas in cyberspace

What can this man teach web retailers?

By BBC News Online internet reporter Mark Ward

This December, e-tailers could do worse than emulate Father Christmas.

Despite a weakness for mince pies, sherry and antiquated delivery vehicles, Santa gets one thing absolutely right: year after year, he always delivers.

The same cannot be said of web retailers. Last year, new-economy, web-only retailers dominated Christmas in cyberspace. Sadly their inexperience showed.

The hype surrounding the net tempted many people to do some of their gift shopping online. But it was a decision many came to regret as Christmas day drew nearer and no packages arrived.

Many people were badly let down. Some companies, such as letsbuyit.com, only managed to deliver some orders after 25 December.

Delivery dynamics

Early reports suggest that this Christmas is proving to be less traumatic for the intrepid online shopper. Last year, only 75% of attempted web orders were successful according to a survey by Anderson Consulting. This year the figure is expected to be 92%.

"This year is a bit better but for some of the wrong reasons," said Andrew Day, chief operating officer of fulfilment firm M-Box.

Customers are likely to be happier thanks to e-tailers doing a better job of managing their expectations. Many e-tailers have imposed deadlines on ordering after which they no longer guarantee that customers will get their goods.

Some stopped taking orders on 10 December, others, such as the UK website of Toys"R"Us, closed completely once the deadline for last orders passed. Last year, its US parent company was sued by irate customers that did not get their gifts on time.

For Mr Day this is an admission of defeat. Rather than impose deadlines, e-tailers should do more to make their stock and delivery systems work better, he believes. "Most are completely unprepared for the volume of business that happens over Christmas," he said.

Shopping and clicking

Last year, many e-tailers took orders even though they had no way of knowing if they had enough stock in a warehouse to honour orders. Barely 45% of web retailers bothered to check if their delivery systems could cope with the Christmas crush.

Clearly the problems of 1999 have not scared everyone away and seem only to have dented, rather than crushed, enthusiasm for online shopping. Ernst and Young estimates that UK shoppers will buy 23% of their Christmas gifts online this year. Last year, they bought 14% of them via websites.

Robert Hamilton, founder of shopping service Scan, which lets people buy books, CDs, DVDs and videos via SMS, said the convenience of shopping via the web or phone was catching.

"We can track the behaviour of new users and see them getting entangled in the service," he said. Once customers knew they could rely on a service they would use it more, he added. The company has had people buying gifts while commuting to work and even while fixing a chimney.

Old economy

Unsurprisingly, the problems experienced at the hands of inexperienced e-tailers has driven many shoppers to the websites of High Street stores.

These have the advantage of a well-known name, money to offset the cost of creating and running a website and the delivery systems (or market clout) to get the goods into the hands of the people paying for them.

Jupiter Media Metrix, which tracks website visitor numbers, has found that the traditional retailers are winning out this Christmas. The consultancy found that eight out of 10 of the fastest growing retail websites in the early weeks of December were run by old economy retailers.

"Online shoppers are increasingly turning to familiar brands with offline origins," said Anne Rickert, an analyst at Jupiter. The future may well belong to the traditional retailers too.

Many of the dot.coms that tried hard to attract customers last year are now out of business or struggling to survive.

Many have seen demand fall to a fraction of what it was predicted to be. As the markets turn against tech companies some employees might be left with another, but less welcome symbol associated with Santa. The sack.