Online Spending Back to Economic Reality?

Dec. 5, 2010

Consumers have slowed their holiday online spending after setting a record of $16.8 billion for the first month of the all-important selling season for retailers. That’s according to research firm comScore.

comScore says the  2010 12 percent growth-rate over 2009 slowed to 9 percent after Cyber Monday’s record $1.028 billion in purchases. The spending for the next three days – $911 million, $868 million and $850, respectively – showed a clear subsiding in spending by consumers.

“We believe this softening is attributable to retailers’ heavy discounting and promotional activity during the earlier part of the holiday season [through Cyber Monday], which pulled some consumer demand forward, resulting in a mild hangover effect in the days immediately following Cyber Monday,” said comScore chairman Gian Fulgoni.”

2010 Holiday Season To Date vs. Corresponding Days* in 2009
Non-Travel (Retail) Spending
Excludes Auctions and Large Corporate Purchases
Total U.S. – Home/Work/University Locations
Source: comScore, Inc.
   Millions ($)
2009 2010 Percent Change
November 1 – December 3 $15,041 $16,803 12%
Thanksgiving Day (Nov. 25) $318 $407 28%
Black Friday (Nov. 26) $595 $648 9%
Cyber Monday (Nov. 29) $887 $1,028 16%
Week Ending Dec. 3 (Nov. 27 – Dec. 3) $4,724 $5,163 9%

*Corresponding days based on corresponding shopping days (November 2 thru December 4, 2009)

“We may see another week of this effect before late season discounts and buying by procrastinators gives the season a final spending surge,” he added.

Unfortunately, for small retailers, comScore reports most of the spending benefits the 25 largest retailers. Their revenue jumped 20 percent compared to much slower growth for small retailers. The big 25 gained 4.2 percent market share to 67.8 percent. That’s probably because they have more financial resources for promotion.

Analysis of Spending Growth Among Top 25 Online Retail Sites
Nov. 1-29, 2010 vs. Corresponding Days in 2009
Total U.S. – Home/Work/University Locations
Source: comScore, Inc.
Spending Growth Dollar Share
2009 2010
Total Retail 13% 100.0% 100.0%
Top 25 Retailers 20% 63.6% 67.8%
Small and Mid-Tail Retailers 0% 36.4% 32.2%

Social media continues to influence many shoppers, but not all, according to comScore’s survey of 500 respondents. Thirty-three percent said recommendations from friends are important to them, but 24 percent disagreed while 43 percent didn’t comment.

Q: “How much do you agree with the following statement? Recommendations from friends on social media sites are a great way to get gift ideas during the holiday season.”
November 24-29, 2010, n=503
Total U.S. – Home/Work/University Locations
Source: comScore 2010 Holiday Survey
Response Percent of Respondents
Strongly Agree 7%
Agree 26%
Neither Agree nor Disagree 43%
Disagree 9%
Strongly Disagree 15%

Consumer-product reviews followed by expert-product reviews, respectively, were influential.

But with dire unemployment news and decreased government revenue, my sense is that a tepid economy is still a factor. A combination of spending by affluent shoppers and heavy discounting are responsible for the initial online-spending growth rate. The economy is still difficult for the majority of consumers.

This also means governments at all levels need to borrow strategic planning strategies from successful businesses. It’s past time for them to adopt public policies with balanced budgets for the benefit of their constituents.

From the Coach’s Corner, for some quick tips to boost your Web-site sales, see 10 Tips to Optimize Your Web Site for Higher Sales.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.