Struggling Web retailers still hot with consumers

Daniel Sorid

NEW YORK: Even as dotcom retailers struggle to turn a profit, US shoppers are

spending significantly more of their holiday dollars on the Internet this year,

picking up Christmas and other seasonal gifts at superstores and specialty

sites.

Internet users in the United States plan to buy about one-third of their

holiday gifts online this winter, up from about one-quarter last year, according

to a new survey from Goldman Sachs and PC Data Inc.

Fifty-five million Americans, or about one in five, will visit an Internet

retail site in December, up from 14 million in the same period last year, said

Sean Kaldor, the vice president of Internet commerce and research firm

NetRatings.

News about the growing popularity of online shops comes as several online

retailers have run out of cash in a market increasingly skeptical about Internet

ventures.

It also comes as online retailers strive to avoid the customer service

problems that plagued the 1999 holiday season, such as lost orders, shipment

delays and insufficient capabilities for returned merchandise.

But while the verdict is still out on whether e-commerce companies can thrive

in the long-term, consumers continue to benefit from the generally lower prices

and wider selection on the Internet.

"E-commerce from a consumer perspective is phenomenal," Kaldor

said. "The question is, can you make money out of it?"

Companies such as Pets.com, Mothernature.com, and Garden.com have all gone

out of business, despite offering glossy online storefronts and good deals on a

range of products.

"Pets.com, the best known brand in the pet sector, good customer

service, high repeat purchases. But they had a zero dollar gross margin,"

Kaldor said. "That's not a business, that's a hobby."

The most popular online retailer, Amazon.com, has seen its stock market

valuation tumble over the year, even as it continues to add new customers and

product lines.

Amazon stock was off $2-3/8, or 8.8 per cent, to $24-9/16 in mid-day trading

on the Nasdaq exchange, off a 52-week high of $113.

In November, Amazon led the pack of so-called "e-tailers" by a

large margin, with about 53 million visits in November, according to data from

Nielsen/NetRatings. Dell.com, the site of No. 2 PC maker Dell Computer Corp.,

took second place with 9.9 million visits, followed by CDnow.com with 9.3

million.

CDnow, consistently among the most popular Internet retail sites, had to be

rescued from a cash crisis by German media conglomerate Bertelsmann AG , which

bought it at a bargain-basement price in late summer.

The news of increased online retail spending comes amid a dreadful day for

technology stocks, with the tech-laden Nasdaq exchange off more than 6 per cent

for the day.

(C) Reuters Limited 2000.