Online Strategy: Why E-Commerce Worked Last Year

It’s always good to know just why something happened, because, in theory at least, you can replicate those conditions and expect to end up with the same result. Aided by consumers, online merchants did enough of the right things in 2004 that they ended up with the best sales since the heyday of the dot-com era–$136.6 billion for the year, according to a report from Forrester Research Inc. And here’s why, says Forrester analyst Carrie Johnson:

Making it through a mid-year slump. Online sales had been growing steadily, but declined in the second and third quarters. Years earlier, this could have been a red flag, but by mid-2004 e-commerce was mainstream enough that it was merely reflecting offline trends, mirroring slow summer and back-to-school retail sales.

Doing a great job of managing the holiday season. Holiday sales totaled $14.4 billion, more than a billion dollars ahead of Forrester’s projections. The reasons? “Early promotions and late gift card offers helped online retailers start the season strong and keep it stronger than in past years—right through the week leading up to Christmas,” says Johnson.

Committing to online commerce. Emboldened by lackluster sales at eBay and, traditional brick-and-mortar retailers finally quit waffling and decided to solidify their Web presence. Circuit City relaunched its Web site, T.J. Maxx debuted one, and Wal-Mart and Blockbuster began special online promotions.

Playing to consumers’ love of convenience and comparison-shopping. Extraordinarily convenient to buy online, gift cards starred as a best seller last year. Best Buy reported that gift card sales online rose 30% over 2003; The Sharper Image posted 35% growth. And the Web has become indispensable for comparison-shopping. Consumer awareness of comparison-shopping sites surged 61% from 2003 to 2004, with women accounting for nearly half of these sites’ users, Johnson reports.

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