Sunday, December 23, 2007

Holiday Internet Sales in U.S. Rise at Slowest Pace on Record

By Mark Clothier

Dec. 24 (Bloomberg) -- U.S. Internet sales rose at the slowest pace on record as discounts cut revenue in the final days of the holiday shopping season.

Online spending from Nov. 1 through Dec. 21 increased 19 percent from the same period a year earlier to $26.3 billion, Reston, Virginia-based ComScore Inc. said yesterday in a statement. Sales trailed last year's 26 percent growth and the research firm's forecast for a 20 percent gain during this year's holidays.

Consumers have limited spending growth this year as gasoline and food prices rise and mortgage defaults increase. The Reuters/University of Michigan final index of consumer sentiment for December dropped to 75.5, the lowest since October 2005.

``This year will be the year of the discount,'' Fred Crawford, managing director at AlixPartners LLP, told Bloomberg Television on Dec. 21. AlixPartners is a consulting firm based in Southfield, Michigan.

ComScore hasn't recorded growth of less than 20 percent since it began reporting online sales figures in 2002.

Wal-Mart Stores Inc., Best Buy Co. and Circuit City Inc. offered discounts of 50 percent or more and promoted savings for in-store pickup of products purchased online to attract shoppers during what may be the worst holiday shopping season in five years. The peak period for Internet purchases has passed, ComScore Chairman Gian Fulgoni said in the statement.

``However, with some online retailers offering deliveries before Christmas for orders placed by Dec. 22, and in-store pickup available for orders placed on Christmas Eve, we expect to see above-average growth rates,'' Fulgoni said.

Last-Minute Gains

Sales rose 25 percent in the five days through Dec. 21 from the same period a year earlier, ComScore said.

``Online has done well considering the tough economic spending situation,'' said Larry Freed, chief executive officer of online research firm ForeSee Results Inc. in Ann Arbor, Michigan.

Shoppers are grappling with $3-a-gallon gasoline and consumer prices that rose the most in more than two years in November. The National Retail Federation in Washington said sales may increase 4 percent this November and December, the smallest gain in five years.

Increased sales both this weekend and during the days after Thanksgiving won't be enough to make up for slower growth during the weeks in between, Crawford said.

Cutting Back

Laverne Chamberlain, 60, said she cut back on spending this year by about 60 percent. The Atlanta resident said she's reluctant to buy toys for her kids because of safety concerns. She's considering a digital camera for her husband, if the price falls enough on Monday.

``It's not like I have to have it, so we'll see if it's good on Monday,'' she said. ``If it's good on Monday, then he'll get a camera.''

U.S. retailers' shares have dropped during the holiday season, with the Standard & Poor's 500 Retailing Index falling 10 percent since the start of November, compared with a 4.2 percent decline by the S&P 500. Inc., the world's largest online retailer, climbed 68 cents to $91.26 on Dec. 21 in Nasdaq Stock Market composite trading. EBay Inc., the largest global auctioneer, jumped 93 cents, or 2.8 percent, to $34.30. Wal-Mart rose 36 cents to $48.21 in New York Stock Exchange composite trading, leaving it with a 4.4 percent gain this year.

Surveys show that consumers are completing their holiday gift buying later this year than in the past three seasons at least, said Michael Niemira, chief economist of the International Council of Shopping Centers in New York. Eighteen percent of consumers surveyed said they had completed their holiday shopping as of Dec. 16.

Spending through Web sites, which makes up more than 3 percent of all retail sales, may climb to $29.5 billion in November and December, ComScore estimated. That's a slower pace than the 26 percent growth in online sales during the holidays in 2006.

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