Alphabet Inc. today reports that Google’s advertising revenue rose 19.5% in the second quarter.
With Christmas only a week away at press time, online retailers were staring at disappointing holiday sales results.
With Christmas only a week away at press time, online retailers were staring at disappointing holiday sales results. There was some hope for a late-season buying spree as 40.2% of consumers said they planned to finish their gift buying online, up from 34.9% a year earlier, according to the National Retail Federation’s 2008 Holiday Consumer Intentions and Actions Survey.
But the numbers up to that point were grim for web retailers-and even worse for bricks-and-mortar stores.
For the first several weeks of the holiday shopping season, from Nov. 1 to Dec. 14, web sales were essentially unchanged from the same period of 2007: $20.17 billion in 2008 vs. $20.26 billion the prior year, comScore Inc. reported. That was quite a comedown from the 2007 holiday season when online retail sales grew 19% over 2006.
Year-over-year physical store sales were down 0.7% in November and 1.4% in December through the second weekend of the month, according to the ShopperTrak RTC Corp. National Retail Sales Estimate. Foot traffic to stores was down 16.7% in November and 18.4% in early December, ShopperTrak said.
Online sales were up and down over the course of the holiday season, with free shipping offers seeming to play a significant role in boosting sales. From the day after Thanksgiving through Monday, Dec. 1, e-commerce spending jumped 13% as both weekend days and Monday all achieved double-digit gains.
Sales for those four days totaled $2.15 billion, up from $1.90 billion a year earlier. Online retail sales on the Monday after Thanksgiving increased 15% to $846 million-the second highest online shopping day in history, as the number of buyers rose 22%, comScore reported.
“Consumers are clearly responding positively to retailers’ aggressive online discounts,” comScore chairman Gian Fulgoni said at the time.
But sales momentum slowed in the two weeks that followed. For the first week of December, Dec. 1 to Dec 7, web sales grew 7%, comScore reported, to $4.45 billion, up from $4.14 billion a year earlier. Web sales from Dec. 8 to Dec. 14, the latest data available at press time, totaled $4.54 billion, down 2% from the prior-year period. That brought year-over-year growth in holiday online sales close to zero as of mid-December.
Combined with the steep discounts that retailers offered throughout the season, free shipping offers appeared to spur online consumers to buy. During the week that ended Nov. 30, 42% of retailers offered free shipping, online sales were up 1% and the average order value was $120, according to comScore. The following week-which included the Monday after Thanksgiving when online retailers heavily promoted sale prices-40% of retailers were offering free shipping, sales were up 7% over the prior year and the average order surged to $133.
A long-term shift?
However, during the next 7-day period, ending Dec. 14, comScore says only 38% of online retailers offered free shipping, sales dropped 2% from the year before and the average order plummeted to $104.
“Over the past few years, free shipping has emerged as a critically important incentive for online shoppers, and its importance has been magnified in the current retail environment,” Fulgoni observed.
That environment of economic slowdown could change retailing for some time to come, warned Brad Anderson, vice chairman and CEO of Best Buy Co. Inc., after the multi-channel retailer announced last month a voluntary severance package program for most of its staff.
“We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace,” Anderson said. “The historic slowdown in the economy and its effect on our business over the past 90 days have been the most challenging consumer environment our company has ever faced.”