Leading Internet research firm Jupiter Communications, which released its sales projections today, expects e-commerce sales in November and December to reach $6 billion. That's nearly double the $3.1 billion sales the firm estimates e-commerce generated last year, and falls into line with what other analysts are projecting.
Typically the biggest season for the offline retail industry, holiday shopping has become crucial for e-commerce companies as well. And this year could be no different, with such offline retailers as Wal-Mart, Banana Republic, and Circuit City revving up their sites for the holidays.
But the big numbers won't necessarily translate into big profits for e-commerce companies, said Vernon Keenan, a financial analyst with Keenan Vision. E-commerce companies are seeing a crunch on their earnings because, as they try to attract market share, they must keep prices low, Keenan said. And to attract customers, firms must spend millions on advertising.
"I don't see any bright prospects for earnings in '99," Keenan said.
But some companies could fare better than others could this season.
Companies that are poised to do well this Christmas are the pure e-commerce companies such as Amazon that have been building up their distribution systems, as well as brick-and-mortar companies such as Gap that already have their infrastructure in place, said Argus Research analyst Alan Mak. He said order fulfillment will be paramount this year.
Mak said that the differences between the stock prices of e-commerce companies will start to reflect their success this holiday season. While Mak expects eBay and Amazon's prices to "really shine," he said the smaller e-commerce players "will continue to stay very small and will fall off the radar screen."
"The cream is rising to the top," he said.
However, analysts say nothing short of a major Internet security scare could stop the jump in holiday sales. Jupiter projects that the number of people who have bought products online will jump from 19 million at the end of last year to 29 million at the end of this year.
"No one can say that they were surprised by this fourth quarter," said Ken Cassar, digital commerce analyst at Jupiter. "Everyone knows it will be enormous."
Jupiter's Cassar said that this holiday season should be a benchmark for e-commerce. Companies that do well will receive the confidence of investors, and share in the greater e-commerce dollars in years to come. Companies that don't could find themselves out of the e-commerce game, he said.
Because of that, Cassar said it's crucial for e-commerce companies to avoid outages and to make sure that they fulfill their orders this Christmas.
"They've got to prove that they are viable or find another business," he said.
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