eMarketer looks at the dynamics of internet shopping as the crucial holiday season looms.

The days may still be warm, but retailers are focused on the holiday shopping season. For online retailers the challenge may be even more pressing, because many believe that the first holiday shoppers began making their online purchases as far back as August.

The online holiday season kicks off before the offline season, according to a survey of e-retailers by LaGarde done in July 2005. Over 25 percent of respondents believed online shopping would start in August or September, and over 60 percent stated they believed the season would start before November 1.

eMarketer estimates that fourth-quarter online sales will reach $26.2 billion, up almost 22 percent from last year. That's a strong gain, but it is the lowest annual growth rate in four years.

Plotting weekly online sales for the 2003 and 2004 holiday seasons highlights several trends. First, online sales accelerated the week ended November 21 in 2004 and one week earlier (November 14) in 2003, marking the beginning of the online holiday shopping season. While some shoppers begin their holiday gift buying before November 1, their aggregate impact on sales figures is nominal.

Second, online sales peeked in both 2003 and 2004 during the week ended December 12. comScore reported that daily online sales crossed the $400 million threshold for the first time on December 9, 2003, when they reached $428 million. In 2004, online sales exceeded $400 million each day from December 6-10.

Finally, the drop-off in online sales, marking the end of the holiday buying season, began during the week ended December 19 in 2003 and 2004. However, the decline was gradual in 2004, but sharp in 2003. This indicates that in 2004, shoppers continued to buy online later into the holiday season.

Proof of extended online holiday spending is evident by the sharp year-over-year increase in online retail sales reported by comScore for the weeks ended December 19 (57 percent) and December 26 (53 percent), 2004. comScore attributed the extension of the online holiday buying season in 2004 to several factors:

• In-store pickup and delivery from local warehouses that gave consumers last-minute purchase options
• Delivery guarantees-stemming from retailers' operational improvements-that allowed shoppers to place some orders as late as Christmas week and receive delivery by Christmas Eve using standard shipping
• The ability to send gift certificates (an increasingly popular online and offline holiday gift) instantly via email from websites
• A shortage of products available offline, in particular Apple's iPod, resulting in last-minute online purchases of these products
• Greater online shopping via broadband connections from home

Some interesting trends related to the timing of online holiday shopping were unearthed by Shopzilla, a leading comparison shopping site. A study of online shopping habits during the 2004 holiday season revealed that consumers shifted the time of day they shopped on Shopzilla's site. Whereas lunchtime (noon-1 p.m.) used to account for the bulk of online holiday shopping, consumers moved their online purchases to after 5 p.m. Pacific Standard Time. Shopzilla attributed this trend to more consumers with PCs at home and more broadband Internet connections. Shoppers had more time to search and compare products instead of trying to squeeze their Internet usage into the workday lunch period.

Shopzilla also found that women conducted the majority (68 percent) of searches on its website after 5 p.m. Late night shoppers online between the hours of midnight and 4 p.m. Pacific Standard Time were the most industrious online shoppers. During the six months prior to December 2004, this group made an average of 8.56 purchases vs. 7.83 for all online shoppers. They were also slightly older and more affluent than the average online shoppers. These late-night shoppers were approximately 40 years old and had annual incomes of $80,173.

A key factor in extending the online holiday shopping season has been the popularity of gift cards, allowing last-minute gifts via email.

A survey by NPD Group found that 30 percent of respondents said they bought gift cards during last year's shopping season.

Deloitte & Touche, in its October 2004 retail holiday survey uncovered some of the demographic characteristics of gift card buyers:

• Females over males, 70 percent vs. 59 percent, respectively, are more likely to be giving them
• Interest in gift cards is strong across all age groups and particularly high among upper-income households
• By a two-to-one margin, US consumers preferred gift cards over money

Jeffrey Grau is a senior analyst at eMarketer. This article is drawn from the new eMarketer report, "Online Holiday Shopping Preview."