Wednesday, December 26, 2007

Online Holiday Sales Rising At 19% Clip, Just Short Of Views

Free shipping and product discounts have kept consumer PCs busy, though the e-tail growth rate this holiday almost surely won't match recent years.

U.S. online retail sales hit a record $26.2 billion from Nov. 1 through Dec. 21, up 19% from the year-ago period, says ComScore Networks. ComScore didn't issue an outlook, but Jupiter Research and Forrester Research (NASDAQ:FORR) had forecast 20% and 21% growth, respectively.

U.S. retail sales overall had been expected to rise 4% to 6% this holiday season. But retailer Target (NYSE:TGT) TGT on Monday said it expects its December same-store sales to be up 1% to down 1% vs. last December.

ComScore says online sales from Nov. 1 through Dec. 17 last year rose 25% to $20.1 billion.

As the dollars rise, some slowing growth is expected. Still, many online sellers report robust sales.

"At least 30% of our sales come in the last quarter, and probably half of that is off the Internet -- and that's going up year after year," said Carolyn Beem, manager of public affairs for outdoor clothing seller L.L. Bean.

This year, L.L. Bean offered free shipping on all orders from Sept. 28 through Friday. "We think it paid off," Beem said.

Amazon.com AMZN, the Web's No. 1 online retailer, on Saturday said five of the top 10 items on its electronics best-seller list are Apple AAPL iPod players. Apple shares Monday rose 2.5% to an all-time closing high of 198.80.

Amazon rival Buy.com (NASDAQ:BUYY) reports strong sales of Microsoft's (NASDAQ:MSFT) MSFT Zune and SanDisk's (NASDAQ:SNDK) SNDK Sansa players.

Discounts, in many cases, are fueling the sales, says Jeff Wisot, Buy.com's vice president of marketing. "A lot of these manufacturers will let us discount the price," he said.

Even with a slowing growth rate, the dollar amounts are rising in the billions, points out Ron LaPierre, chief executive of PriceGrabber.com, one of the largest comparison-shopping sites.

"The fact that e-commerce can generate $4 billion more in sales than it did this time last year is very promising," he said. "I'm sure (e-commerce growth) numbers are going to be significantly above retail as a whole."

The overall retail market has been sluggish, with fears of recession sparked by the subprime mortgage mess and rising oil prices. Retail sales dipped 0.4% in the week ended Dec. 15 from the year-earlier period, says ShopperTrak.

And remember, e-tail still has some first-time users to pick up, says LaPierre. "The Internet is still acquiring new users and new shoppers," he said.

E-tailers are taking steps to keep consumers shopping longer. Fossil, an apparel seller, is providing free next-day air shipments. Electronics retailer Best Buy BBY provided free shipping for all its online digital cameras sales.

Such offers seem to be driving more consumers to search for deals online, says Fiona Waslander, director of the YHOO Yahoo (NASDAQ:YHOO) Shopping comparison-shopping service.

"The traffic growth last week (ended Friday) was stronger than what we expected," she said.

Traffic to Pronto.com, a comparison service owned by InteractiveCorp (OTCBB:IACPP) (NASDAQ:IACI) IACI, also has risen in the last week as consumers take advantage of its free shipping offers, says Dan Marriott, Pronto's chief executive.

"We have seen volumes to our retailers start to die late in the second week of December, but we have had strength even in the third week," he said. "That is surprising."



Newstex ID: IBD-0001-21882899

Originally published in the December 26, 2007 version of Investor's Business Daily.

Jason Kiwaluk

Mower & Shoveller,

Ecommerce | Adtech | Innovation | Strategy

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