Economic woes have dumped a lump of coal on the nation's online retailers, which, like their brick-and-mortar rivals, have struggled with an uneven holiday business following a strong official start to the season.
ComScore Inc., an Internet research company, reported Sunday that online sales from Nov. 1 through Dec. 14 rose 18 percent from the same period a year ago to $22.67 billion, but that's less than the 26 percent growth rate seen last year and the 20 percent projection for the season. And while online merchants are stepping up promotions even more and offering free shipping upgrades to extend the season, it's clear that e-retailers are as vulnerable to the economic challenges as their rivals with physical stores.
The current economic realities are forcing customers to "pick their spots, and they are waiting for the deals," said comScore Chairman Gian Fulgoni. "I think it is possible that they are procrastinating longer than a year ago."
Fulgoni noted that the subprime mortgage meltdown, slumping housing values, higher gasoline prices and an uncertain stock market are affecting shoppers at different income levels. But he noted that consumers in lower-income segments appear to be the most hurt, as reflected by the sluggish growth in their rate of online spending.
ComScore's analysis of data shows that while households earning at least $100,000 have increased their online spending 28 percent versus a year ago, households making less than $50,000 have increased their spending by just 10 percent.
Fulgoni noted that despite the strong surge in spending comScore observed at the beginning of last week, with both Monday and Tuesday easily exceeding $800 million in sales and showing robust growth rates, the remainder of the week had a more modest spending pace. Monday, Dec. 10 will most likely remain the busiest day of the season, with $881 million in sales, though Fulgoni is closely watching how this Monday fares.
Online sales started off weak in early November but enjoyed strong business over Thanksgiving weekend and on what the industry calls "Cyber Monday," the first Monday after Thanksgiving and the official start for e-tailers. But since then, business has been choppy, despite a flurry of deals, Fulgoni said.
In malls over the weekend, it was clear that shoppers continued to be cautious, including Heather Johnson of Chester, Va., who shifted more of her shopping online.
"I did quite a bit on the Internet," said Johnson, who was at the Chesterfield Towne Center in suburban Richmond, Va., on Friday. But unlike last year, she had a plan for holiday giving.
"I actually started a savings account that I was putting money in twice a month," she said. "So I saved up enough to kind of budget what we were going to spend on our families."