How Wall Street Stole E-Christmas

Despite all the appearances of a banner Christmas season, online retailers got the cold shoulder from analysts and investors alike at year_s end. Many dot-coms ultimately couldn_t satisfy customer demand. A Goldman Sachs-PC Data study revealed online sales dipped nearly 30 percent the week before Christmas, as sites could no longer guarantee buyers timely delivery. Toy retailers had some of the biggest problems. Toysrus.com, for instance, couldn_t promise Christmas delivery for online orders made after Dec. 10 and promised $100 coupons to customers who didn_t get their toys in time. In general, analysts saw site hiccups, spotty selection and poor customer service as sobering signs that some dot-coms are not ready for prime time. Another early casualty was Value America (VUSA) , which last week said it would slash 47 percent of its workforce after fourth-quarter sales fell below expectations. Also, Amazon.com (AMZN) was hit with a downgrade last week. First Call reported an analyst consensus rating of "buy" – down from "must buy" – on the stock amid whispers that its margins are falling. Yet there was good news. Almost every dot-com retailer showed sizable revenue growth. Early Christmas sales figures hovered around $10 billion, according to trade association Shop.org. In some cases, online sales were four to five times larger than last year_s overall tally. But traditional retailing stock stole some of the thunder, as companies in that sector reported sales jumps of more than 8 percent over last year – their best showing of the 1990s. Standard & Poor_s Retail Index jumped more than 9 percent during the holiday period. At the same time, e-commerce bellwethers Amazon, eBay (EBAY) and eToys were all down during the same period.