Growth projected for online Q4 sales

DVDs still high in demand, but not top of list

By Jennifer Netherby -- Video Business, 11/4/2005

NOV. 4 | Free shipping offers from online retailers are expected again this year, helping to lure more consumers to the Internet for holiday shopping.

Jupiter Research estimates that online purchases will climb 18% to $26 billion this holiday season. A dueling report out a day earlier from Forrester Research projected the overall market will be up 25% this holiday to $18 billion.

Either way, analysts say the growth this year will come from new online customers rather than increased spending by people who bought gifts online last year.

“While the expected sales increase for retailers is significant, consumers are feeling pinched by expensive energy prices,” said Jupiter analyst Patti Freeman Evans. “They will respond to free shipping offers, but these offers will not be enough to encourage them to spend more than last year.”

DVD was one of the hottest categories for online retailers last year, but this year, consumer electronics, toys and apparel will be the most popular gift items, according to Forrester.

Of course, DVD remains a strong category at Amazon.com and BarnesandNoble.com, both of which are heavily promoting the category on their main pages. And other DVD specialty stores and electronics retailers also are heavily promoting DVD online.

Specialty chain Trans World Entertainment is offering some of the lowest pricing online on its FYE.com site, undercutting WalMart.com and Amazon.com. FYE is selling preorders on Warner Home Video’s March of the Penguins for $12.99 after rebate. WalMart.com is selling the DVD for $17.87, and Amazon.com has it for $16.98. BarnesandNoble meanwhile is selling it for $20.28.

FYE is one of the few online sites not offering free shipping on orders, while Amazon, BarnesandNoble and Suncoast offer free shipping on orders of more than $25.

Wholesaler Baker and Taylor’s online fulfillment business has seen double-digit growth over the last year and now serves more than 200 Internet retailers, said senior VP video Frank Wolbert.

Retailers also are using their online sites to promote in-store sales of DVD players and other products. Circuit City is promising to have any order placed online ready for in-store pickup 24 minutes after receiving an order confirmation e-mail.

Online DVD players continue to grow, with sales still dominated by catalog and niche product online, unlike the bricks-and-mortar stores where new releases still make up the majority of sales.