How Bleak Is The E-Commerce Picture? Mixed Messages

Written by Evan Schuman
November 27th, 2008

It’s no surprise that with the economy in freefall, retail sales are going to take a pounding. E-Commerce has been seen as a bright spot, although even healthy online growth won’t compensate for brick-and-mortars taking an historical shellacking.

Recently released numbers raise questions as to whether online will be much of a savior at all. New figures from eMarketer project that E-Commerce sales will top last year’s numbers by some $5.6 billion, a 4.1 percent increase from $136.8 billion to $142.4 billion.

Granted, that 4 percent growth is positively anemic compared with the 2008 over 2007 rate of 7.2 percent and the prior year’s 19.8 percent. But at least it’s an increase, which is more than can be said for in-store sales.

But will even that 4 percent figure prove to be overly optimistic? The latest figures from Comscore detail the actual E-commerce spending for the first 23 days of this year’s holiday season, and they show only $8.2 billion actually spent online. This total is a 4 percent decrease from the prior year’s identical period, a figure Comscore dubbed "unprecedented." Comscore is forecasting that online retail spending this holiday season will end up being flat, roughly matching last year’s online figures.

Comscore Chairman Gian Fulgoni held out a little hope that the last few weeks of E-Commerce this season may turn things around, as consumers rush in to take advantage of late season sales.

"Despite the recent reprieve that plummeting gas prices have given American consumers, the depressed and volatile stock market, declining housing prices, inflation and the weak job market all represent dark clouds hanging over their heads this holiday shopping season," Fulgoni said. "With consumer confidence low and disposable income tight, the first weeks of November have been very disappointing, with online retail spending declining versus a year ago. It’s also likely that some budget-conscious consumers are planning to wait to buy until later in the season to take advantage of retailers’ even more aggressive discounting."

The happy-go-lucky Fulgoni then raised the prospect of even more holiday cheer: "Assuming the stock market doesn’t deteriorate materially during the season and there is no apocalyptic news of major financial institutions, manufacturers or retailers failing, we should see online spending growth inch back toward positive as we get deeper into the season," he said. "However, if there is any more significant bad news just over the horizon, all bets are off."


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