Online sales strong; traditional retailers dominate

NEW YORK -- Despite gloomy reports from online companies such as eToys, it appears Internet retailers had a decent holiday season, with revenue more than doubling from a year ago.

Final figures for the season won't be released until later this month, but sites run by large, well-established stores, such as Wal-Mart and Kmart, clearly emerged as the big winners in cybershopping. Purely online retailers didn't fare as well, with the exception of Yahoo! and Amazon.

For many online retailers, Thanksgiving through Christmas this year was considered the make-or-break sales period, and some industry watchers say there could be a wave of consolidation once the season's sales figures roll in.

"A lot of e-tailers had a Christmas wish list that was well beyond what the market was realistically going to deliver," said Seth Geiger, vice president of professional services at Bizrate.com, a market research company.

"We will be seeing a lot of businesses fold, or be consolidated," Geiger said. "In the end, you are going to have two extremes -- the big players and the smaller niche players" such as Christianbooks.com or Boatersworld.com.

So far, reports from various Internet research firms reveal significant growth from last year, though a souring economy and poor publicity surrounding dot-com companies held revenue from reaching the most bullish forecasts.

Bizrate.com reported that online sales from Nov. 20 through Dec. 26 reached $6 billion, up 60 percent from last year but below the 80 percent increase it had projected. A joint study from PC Data and Goldman Sachs estimated holiday e-commerce sales reached $9.8 billion, up from $4.7 billion last year.

Eleven of the 15 most popular sites were bricks-and-mortar chains, such as Barnes & Noble, Wal-Mart, Sears and Target, according to Nielsen/NetRatings. Amazon, which joined its toy business with Toys R Us this season, topped the list. Kmart Corp.'s Bluelight.com reported online holiday sales 11 times higher than last year, far exceeding expectations, according to spokesman Dave Karraker.

The online-only retailers, however, are expected to have been hurt during the season. The woes of eToys.com, which reported last month that holiday revenues are falling drastically short of projections, are expected to be played out at other purely online retailers. Among those being watched by analysts are buy.com and CDNow.com.

While Amazon continued to hold its lead and appeared on track to reach $1 billion in revenues for the fourth quarter, the question remained whether it would be able to narrow its losses.

"It was a big surprise to see how poorly eToys did this season," said Ken Cassar, a senior analyst at Jupiter Research.