Let the (Online) Shopping Begin

Forget Black Friday. The real bargains this year are showing up on Cyber Monday, the first work day following Thanksgiving when people return to their offices, ignore the tasks at hand, and begin to surf the Internet in earnest for this year's holiday gifts. Roughly 45 percent of online retailers expect their holiday sales to increase this year by at least 15 percent compared with 2008, according to the industry group Shop.org. "People view the Internet as the place to save money and find the best prices through comparison shopping," says Scott Silverman, Shop.org's executive director.

Online sales may be the lone sweet spot for retailers in this otherwise dismal economy. With double-digit unemployment and a foreclosure crisis that just won’t quit, consumers are expected to spend even less this season. Overall, the National Retail Federation expects consumers to spend an average of $682.74 on holiday-related gear, food, and gifts, compared with an average of $705.01 in 2008.

While traditional retailers have had their ups and downs over the last decade, online sales have risen steadily since 1999. That's when companies such as Amazon.com, Priceline, and eBay first rose to prominence, prompting NEWSWEEK to proclaim that these three businesses had set out to "change the way you shop." Since then, the sector has grown from a $4.6 billion industry to a $31.5 billion industry. "The story of the last decade is that there has been consistent 20 percent growth," says Ken Cassar, vice president of industry insights for the Nielsen Co., about online shopping.

That growth may have something to do with online retailers' willingness and ability to pass on their reduced overhead costs in the form of discounts to consumers. Roughly nine out of 10 online businesses recently surveyed by Shop.org planned to offer some type of promotion for Cyber Monday in the form of one-day sales, free shipping, and "deal of the hour" sales. Roughly 57 percent plan to offer free shipping this year; Target started waiving shipping and handling fees on Nov. 1, a full two weeks before the promotion normally starts. This year, about 15 percent of all retailers will no longer require consumers to spend a certain amount of money to qualify for free shipping.

For their part, traditional retailers are increasingly making use of online social-networking sites like Twitter and Facebook to drive foot traffic and boost in-store sales. Staples and Toy "R" Us are letting followers know about special deals on a daily basis. Toys "R" Us sent its Facebook fans an announcement on Wednesday—a full two days before the "holiday"—that detailed its Black Friday specials. Other stores such as Best Buy, Gap, and American Eagle are using these sites to hand out coupons, much the way they once relied on grocery-store or newspaper circulars. "Social media stimulates sales and creates demand," Silverman says. "It's a great way to communicate with your customers."

From the retailers' perspective, the best part about online holiday shopping is that its success is not measured on a single day. The results from Black Friday are often used to forecast consumers' moods about the entire holiday season or, worse, the first quarter of the following year. By comparison, online holiday shopping remains steady throughout the month of December, says Andrew Lipsman, director of industry analysis for ComScore, a research firm. If there is a peak with holiday online sales, it happens over an entire workweek, usually between Dec. 10 and 15, he says.

Even with this cheerleading over online sales, retail researchers acknowledge that e-commerce will never really usurp Black Friday. Online retail spending year-round—including spending on food, cars, and gas—still accounts for just 8 percent of retail sales overall, says Lipsman. "People like to get out into a store," he says. "Black Friday is [still] a cultural phenomenon."