- 29 giugno 2009

A Day in Boston at the Internet Retailer Conference

Last week, I spoke at the fifth annual Internet Retailer Conference & Exhibition in Boston. In spite of the continued uncertainty of the economy and the retail market, the conference, which ended Thursday, attracted more than 5,000 attendees and 368 exhibitors. Attendance was down only slightly from the 5,200 total attendees at last year’s conference. Exhibiting companies were up 43 from the 325 that exhibited at IRCE 2008 in Chicago.

I was the second speaker, following Patrick Byrne, chairman and CEO of Overstock.com, who kicked off the main conference with a Keynote Address that emphasized the growing competitiveness of the e-retailing market and the need, in these challenging economic times, to stay one step ahead of the competition. Patrick also gave a disturbing review of the perils of being a public company when short sellers take aim at you.

In my talk, I focused on the trends in e-commerce spending as measured by Comscore data. Shown below is what we’ve been seeing in 2009. Not a pretty picture. I had hoped that we had reached the bottom but I have to admit being disappointed by the decline in May. We’re hypothesizing that an increase in gas prices coupled with growing unemployment are the causes of the softness in the month.

Now, the question that everyone is asking is “When will we see growth resume?” To help get a fix on that, I examined consumer spending patterns by income and age and found some very interesting – but also disturbing – trends in the patterns of consumer behavior:

I believe that e-commerce spending is a good surrogate for consumers’ disposable income spending since it doesn’t include the necessities such as food and energy (which are not bought online). It’s clear from the Comscore data that the older mid-to-upper income households (who have significant purchasing power) have significantly curtailed their online spending – if not reduced it. I have to believe that the destruction of wealth these households experienced in Q4 last year, coupled with their high debt levels and the fact that they have “few degrees of freedom” left, are the factors driving them to save and try to regain the wealth they need to pay for their kids’ college costs, retirement, etc.

Since overall consumer spending accounts for about 70% of the GDP, the lack of spending by this important consumer segment could possibly continue to be a drag on the GDP and the economy for some time going forward. We can but hope that this will not turn out to be the case.

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