Gas, food, shopping
August 18, 2008

The growth in e-commerce has dramatically outpaced traditional retail sales since early in the decade, but in the current economy, it’s even starting to get harder to make a buck online.

E-commerce growth rates remain significantly stronger than bricks-and-mortar retail, where growth has been negative throughout 2008 when adjusted for inflation, according to ComScore and the U.S. Dept. of Commerce.

Nevertheless, growth in consumers’ online spending has slowed dramatically in 2008 as a result of price increases and the soft economy, says ComScore. E-commerce sales for the first half of the year were
$106 billion, including travel, according to ComScore, representing a growth rate of 12%—off from growth of 17% for the full year in 2007 and 20% in 2006.

In fact, a sharper first-quarter drop in e-commerce growth than offline retail sales indicates that offline spending is dragging down e-commerce, ComScore executives said.

Simply, once people fill their gas tanks and their tummies, they have less discretionary income left for clothes, cosmetics, movies and all the other stuff they buy online.

This is true across all income levels, a trend that escalated between April and June. Two-thirds of ComScore survey respondents making more than $100,000 said in April that they were cutting back on spending, for example. By June, 72% of respondents in the same income bracket said they were tightening their belts.

So what’s an online movie retailer to do?

It helps to be a “clicks-and-mortar” operation. Consumer spending online is now evenly split between pure play e-commerce companies and multi-channel retailers with presence online and off, according to ComScore, after multi-channel retailers gained five share points in the past year, moving up to 50% market share in the second quarter. Multi-channel retailers also saw their average order value increase by more (6.6%) than pure plays (2.1%).

Club, discount and high-end sites all experienced double-digit dollar growth in the second quarter, but mid-tier retailers—which account for 63% of all dollars spent online and include many home entertainment retailers—remained flat. (ComScore counts Amazon.com, Blockbuster.com, BestBuy.com, CircuitCity.com, DVDEmpire.com and Netflix all among mid-tier sites.)

For these retailers, there may be an opportunity in providing customers better pricing and product information. In a ComScore survey, 74% of people said the Internet made it easier to find better, more useful pricing information, and the same portion said the Internet continues to gain importance as a provider of pricing information.

Circuit City is a perfect example. It recently expanded the production information available on its Web site, adding content from magazines including Consumer Reports.

Posted by Marcy Magiera on August 18, 2008 | Comments (0)