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Holiday E-Tailing's Year of the Woman

By Sarah Lacy Women have long been the driving force behind off-line holiday shopping, and this year they flexed their shopping muscles via the Web. That meant a very merry Christmas for e-tailers in female-dominant categories like jewelry, flowers, and home and garden, despite some early forecasts that consumer electronics would be the hot ticket in 2004.

Jewelry was the single biggest growth category, with a 113% increase in spending over last year. Women shoppers also helped make apparel the No. 1 category overall, with 16% growth and $3.8 billion in sales, according to the eSpending Report, released Jan. 3 by Goldman Sachs & Co. (GS), Harris Interactive, and Nielsen/NetRatings. Shoppers spent $1.4 billion more on clothes this year than on consumer electronics.

MONDAY, MONDAY. It was one of the few remarkable trends in what was an otherwise unremarkable two-month shopping season. This year saw shoppers spend about 25% more online vs. 2003, according to the eSpending Report. That's similar to sales totals reported days earlier by VeriSign (VRSN) and researcher comScore Networks, and about what preseason forecasts anticipated.

Just how much was spent varies from survey to survey, with the eSpending Report topping the list at $23.2 billion. VeriSign's tally, which tracks only sales from Thanksgiving to Dec. 27, was the lowest at $8.8 billion.

At 25%, e-tailing's growth has slowed from the early days, when sales leaped by 50% or 100% annually, but analysts are still calling 2004 a good, solid year. As usual, Mondays were the biggest shopping days of the week, with traffic peaking around Dec. 17 -- the last days to ship a present by ground and guarantee delivery by Christmas morning.

STOP TILL YOU SHOP. A deeper look inside the numbers showsig changes afoot in the way people shop online, and in what they buy -- many of the trends attributable to the increasing dominance of women as online shoppers. Consider (OSTK). For the past few years nearly 70% of its shoppers were women, but they weren't the biggest buyers, says Patrick Byrne, the outfit's president and chairman.

Women often visit a new site a dozen or so times before making a moderate first purchase, typically of about $50. Men, on the other hand, tend to buy after just a few visits and to spend larger amounts. But once women feel comfortable, those spending habits can ramp up fast. Byrne hasn't crunched all the numbers yet, but looking at what categories took off this year, he expects that finally happened in 2004, creating ripple effects throughout the site.

Although consumer electronics is still its largest category, saw a fivefold increase in apparel purchases. Eighteen months ago the Web retailer didn't even have that category. Results for some of these newer categories were so good, Byrne expects Overstock's revenues to be double or triple the industry's 25% growth rate.

PISTIL PACKIN' MAMAS. The timing makes sense. It typically takes a consumer three years to get comfortable enough online to start doing lots of Web shopping. Three years ago, the total number of women using the Internet passed the total for men, according to several Internet studies. When you put those facts together, this may have been the first Christmas that women really felt at ease coming to the Internet for a significant chunk of their holiday buying.

The impact of women cybershoppers was broad. Widespread triple-digit surges in other feminine categories seemed to come out of nowhere. PriceGrabber, for one, saw spikes of 149% in jewelry, 239% in apparel, 153% in home and garden, and 313% in flowers, making consumer-electronics' gains of 121% look measly. Similarly, comparison-shopping site (SHOP) reported that most of its searches were in these categories. And comScore dubbed flowers and gift baskets the fastest growing category this year, even selling into the last weeks of December, thanks to what were often next-day delivery options.

Average order sizes were also high: $148 for kitchen and housewares and $140 for women's clothes, according to VeriSign, vs. consumer electronics at an average purchase of $291, the online leader.

SAVVY SHOPPERS. Online stores are taking note and will be scrambling to appeal to more female shoppers in 2005, say analysts. It's a big opportunity to grab more of a family's gift-giving wallet than every before. But e-tailers beware: Women are demanding, seasoned shoppers. They want bargains, tend to be more discriminating, and do their homework before buying, Healy says. "If a man wants to buy a 20-gig iPod, he'll just find and buy it, but women want to know the difference between Product A and Product B," he says.

Expect smart e-tailers to beef up inventories of clothes, flowers, and the like. And expect improvements in customer service. Even the look and feel of sites should become more female-friendly. "In the early days e-tailers sold based on price, and you could assume buyers knew what the product did," Healy says. "Now merchandizing will be way more important than ever before." After all, it's a discriminating woman's world. Lacy is a reporter for BusinessWeek Online in the Silicon Valley bureau

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