November 24, 2010, 3:47 PM

Why e-retail numbers are better than they look

E-retail growth rates are robust, considering the economy. Is a marked shift to more online shopping on tap this holiday season?

Online retailers may be nostalgic for the glory days of 20-plus percent annual growth. But if you look at the numbers, the growth we’re seeing in online retail in 2010 is pretty remarkable. And it could foreshadow some important developments this holiday season.

It’s true that online retail sales grew by 20% in 2007 compared with the year before, and nearly 24% in 2006, according to U.S. Commerce Department figures. But there were reasons for that spectacular growth. For one thing, many consumers were getting broadband access at home for the first time, which dramatically increased online shopping. Now that home broadband penetration is in the 90% range, there’s not much room for growth.

But the biggest difference is the state of the economy. In 2006 U.S. per capita income grew by 6.4% and in 2007 by 4.7%. Unemployment was low and consumers were spending.

Obviously, we face a very different situation now, with unemployment just below 10% and personal income barely growing by 1% on an annual basis. Given that, the 9% growth in e-retail sales in the first 10 months of the year that comScore reports is pretty impressive. And more impressive are the forecasts for the holiday season: comScore is forecasting 11% year-over-year growth, eMarketer 14% and Forrester 16%.

With total holiday purchases likely to grow only in low single digits, double-digit growth would mean web retailers taking another good chunk of market share from bricks-and-mortar stores. In fact, e-commerce analyst Jeffrey Grau of eMarketer predicts that many consumers will avoid stores this Friday—the fabled Black Friday that’s supposed to bring shopping malls to life—knowing they can get great deals online, without getting up at 3 a.m. or fighting for a parking space.

We’ll know within a few days whether any dramatic shift occurs. I suspect Grau may be a bit over-optimistic. Analysts can fall in love with their industries. (Journalists, too.) And store retailers are taking novel steps to capture sales, including such big retail chains as Wal-Mart, Sears and Gap opening stores on Thanksgiving Day.

But it would not surprise me to see the web emerge from this holiday season as the one bright spot in retail, even more than it has been in recent years. 72% of consumers plan to do some shopping or researching online, according to a recent Lightspeed Research survey for Internet Retailer. The big retail chains, even as they try to lure shoppers into stores, have invested heavily in their e-commerce sites in recent years to cater to those consumers who do prefer to shop from home or the office. Consumers are increasingly comfortable shopping online, and, now, even on their smartphones. They know they have all the pricing information, the widest possible selection, and customer and expert reviews at their fingertips.

It does make you wonder why anyone would get up on a chilly Friday morning after Thanksgiving to go to a shopping mall. It will be interesting to see how many make that trip this weekend.

 

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