The Growing Importance of Online Sales
Let me begin this posting by saying I hope that those in the U.S. had a terrific Thanksgiving holiday. It’s a very special time of year and we have much to be thankful for.
Thanksgiving also marks the beginning of the busiest time of the year for the Marketing Communications group here at Comscore, because it’s the kickoff to the media’s intense focus on trends in consumer spending. This scrutiny is understandable, because roughly two thirds of the U.S. GNP is generated by consumer spending. And, since the months of November and December together account for a disproportionately high percentage (20%) of each year’s total spending, there is, understandably, a sharp focus on holiday season spending patterns.
This is the seventh year that Comscore has published online spending statistics and each year there is more interest from the media in our numbers. This year, the 2007 holiday shopping season is shaping up to be a particularly important one. And, an especially intriguing one if you’re a researcher like me. Everyone, it seems, is asking the same, fundamental question. Is the economy being crimped by a decline in consumer spending that can be traced to several problems, including the sub-prime meltdown, the decline in home values, higher gasoline prices, and a weak stock market?
To address this issue, a variety of shopping statistics will be discussed and evaluated in the coming weeks, most notably the percent increase versus year ago in retail sales and “same store” sales. While these are undoubtedly important measures, I think they no longer provide the complete view of consumer spending that they once did. The reason is the growing importance of online sales. To understand this, consider that if one excludes food, gas and autos, online sales will represent about 7.5% of consumers’ total spending this holiday season. So, if online holiday sales grow at a rate of 20% ( Comscore’s forecast), this means that the increase in online spending will represent about 1.5% of consumer spending.
To be sure, it’s likely that a substantial portion of this online growth represents spending that is being pulled from retail. But, the fact remains that traditional metrics which focus only on retail spending and don’t include online buying will understate the strength in consumer spending. We need to be sure to add the e-commerce growth numbers to the retail growth data to get an accurate picture of what consumers are doing. With economists projecting a growth of only 4% in consumer spending, the inclusion of 1.5 points of spending coming from e-commerce could make the difference between a so-so holiday shopping season and a strong one. E-commerce has definitely come of age.