Holiday sales up from 1999; PC price war next

Holiday sales rose slightly this year when compared to 1999 but analysts are already describing the 2000 holiday season as one of the worst in a decade. This is bad news for traditional retail stores, of course, but it's particularly disheartening for Dot Com companies, which are facing a rising tide of consolidations and shutdowns. The slowing sales are somewhat of a surprise, as retailers and etailers alike were expecting strong results as recently as this past September, and the economy, especially in the U.S., had been strong for almost a decade. But with falling stock prices--especially in the tech sector--and other factors, the economy appears to be on a serious downswing, with some analysts expecting a full-blown recession.

According to the International Council of Shopping Centers, home entertainment and electronic products were among the hardest hit this holiday season, dropping 6.3 percent, compared to an overall sales increase this year of 2.2 percent. More expensive electronic items--such as home computers--were the biggest losers, and companies such as Apple Computer and Gateway, which cater almost exclusively to this market, were among the first to issue earning warnings this season. Overall, online sales grew 55.4 percent to $5.83 billion, according to market researcher BizRate.com, but this was far below the expected 100+ percent increase. Other estimates put online sales as high as $8 billion, but no one is arguing that this holiday season wasn't a disappointment.

But not all of the news is grim. Online giant Yahoo reported Tuesday that order volume on its U.S. Web site almost doubled during the holiday season, reaching levels six times higher than last year. Like other Dot Com companies, Yahoo has seen its stock price tumble this year: The company's stock was trading over $200 in January 2000 and fell below $25 this month before this week's financial news rallied the stock 5.5 percent. Yahoo declined to offer any concrete numbers for sales on its shopping sites, but the company noted that its January financial results would be better by "an order of magnitude."

Looking forward, consumers can expect short-term sales so that retailers and etailers can milk revenues as much as possible during the crucial post-Christmas weeks, when up to 11 percent of all holiday sales are logged. And PC makers are expected to begin offering big discounts to rescue a somewhat disastrous quarter, which analysts say could result in a price war. The problem is a high volume of machines clogging the channel, which are losing value every day that they aren't sold. Apple Computer, for example, has over 11 weeks of unsold inventory sitting in the pipeline, a situation that hasn't improved since October. Apple expects sales to fall almost 40 percent this quarter, so the company, and other companies like it, will do what it can to move existing product as quickly as possible. If you're in the market for a PC and don't need the absolute top of the line, the next thirty days might be a prime opportunity