U.S. Luxury E-tailers Await Last Minute Shoppers

By Alexandria Sage

Online diamond and jewelry retailer Blue Nile Inc. knows a thing or two about waiting until the last minute to buy those opulent holiday gifts.

Last year, a mere 14 minutes before the shipping deadline to guarantee delivery by Christmas, a procrastinating shopper clicked to buy his soon-to-be fiancee's engagement ring.

"We're here to save all those guys who are shopping at the last minute," said Blue Nile spokesman John Baird, who expects men to procrastinate just as much this year as they have in the past until the final days before Christmas loom.

But industry analysts are mixed over how luxury online retailers are faring this holiday season.

Providing a boost may be mall-averse men -- a National Retail Federation survey found that 18 percent of them hadn't started their holiday shopping as of last weekend -- together with consumers' increasing comfort level with shelling out hundreds, if not thousands, of dollars on Internet purchases.

Others note that high-end online gift buying is being supplanted by visits -- even among the rich -- to online portals of discounters like Wal-Mart Stores Inc.

Tracking firm comScore Networks found that luxury goods and jewelry sites were the fastest-growing Internet shopping category last month with 16.4 million visitors, a 39 percent jump over October. There is no way to know what percentage were browsing and how many actually ended up making purchases.

"We're seeing a very strong season again online," said comScore Chairman Gian Fulgoni, citing 30 percent more high speed Internet connections over last year and improved faith in Internet security. "With the Internet, (consumers) are starting to buy in a broader range of categories."

Through December 19, holiday sales in the jewelry and watch category grew 13 percent over last year, he said, below the overall increase of

24 percent, while apparel, home and garden, and furniture have all grown more than 30 percent over last year.

Analysts agree that consumers are gradually finding the idea of buying a $123,000 Blue Nile diamond, a $1,400 cashmere wrap from NeimanMarcus.com or a $900 Coach.com python purse all the more natural.

"Consumers start out with books and as they become more comfortable buying on the Internet, they climb the average selling price ladder," said Scott Devitt, analyst with Stifel Nicolaus. "Before you know it, they're buying expensive jewelry on the Internet."


Heather Dougherty, analyst at Nielsen/NetRatings, said the online luxury category is particularly strong at the holidays "because of the way it reflects on the gift giver and recipient -- someone cared enough to buy this upscale gift."

But some point out that the online winners this year are discounters, who have wooed not only lower-income shoppers, but the affluent to boot.

A survey by Internet measurement firm Hitwise found that unique visits to 15 luxury online retailers for the week ending December 17 were relatively flat over last year. Exceptions included Bergdorf Goodman, owned by Neiman Marcus Group Inc., where online visits jumped 159 percent.

Hitwise analyst Bill Tancer said that consumers who earn over $100,000 make up a quarter and a fifth of traffic at Costco.com and Overstock.com, respectively.

At Wal-Mart.com, the demographics of shoppers are more upscale than the average consumer in the stores, said comScore's Fulgoni, attributing the difference to "less of a stigma" attached to shopping online.

Nevertheless, Blue Nile this holiday expanded their high-ticket product line, offering 50 items above $10,000 compared with a mere dozen last Christmas.

For the first three quarters of 2005, Blue Nile said, sales of items priced above $20,000 increased 72 percent over last year. And the biggest quarter is the fourth, since 40 percent of engagements occur between Thanksgiving and Valentine's Day.

Blue Nile Chief Executive Mark Vadon said the company's goal this holiday is to keep the right merchandise stocked and ready for shipment in the last days before Christmas.

"What we're trying to do is keep shipping up to that last minute and allow people in that final week to still be online and not go into the store," Vadon said.

Copyright 2005 Reuters Limited.

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