May 14, 2009, 12:00 AM

No-growth web sales are taking share from shrinking stores, comScore says

ComScore’s Gian Fulgoni notes that while comScore’s measure of online spending showed no year-over-year growth in the first quarter, total retail sales that could be comparable to what is sold online fell 8%.

The economy may still be grim while retailers wait for consumer spending to rebound. But retailers with a strong e-commerce strategy are in a better position to succeed than those without a strong strategy, says Gian Fulgoni, chairman of comScore Inc., an Internet usage measurement company.

Fulgoni notes that while comScore’s measure of online spending showed no year-over-year growth in the first quarter, total retail sales that could be comparable to what is sold online fell 8%. Fulgoni defines comparable sales as total retail sales as measured by the U.S. Department of Commerce excluding automobiles and parts, gasoline stations, restaurants and bars, and health and personal services.

Even more telling are sales of home-activity products: sports and fitness equipment, books and magazines, music and movies. Those sales grew online by 8% in Q1 vs. declining by 2% offline. “E-commerce is picking up share of consumers’ wallet,” Fulgoni said today in comScore’s quarterly webinar on the state of online retailing. “If retailers can focus on e-commerce, that’s where the consumer dollars are shifting.”

Tapping into those wallets takes a nuanced understanding of where the spending is coming from, however. For instance, he notes, online spending by younger middle- and upper income consumers is growing, while spending by older consumers is declining or flat. Among households with income of $100,000 or more, spending by consumers aged 18 to 44 was up 8% in Q1 year over year, yet was flat for consumers over 45. Similarly, among households with income of $50,000 to $99,999, online spending by 18- to 44-year-olds was up 15% in Q1 while spending among those 45 and older was down 11%.

Fulgoni believes that older consumers are more cautious because so much of their wealth has been destroyed since the recession began and they are in rebuilding mode. Savings are up 31% in the new year over last. “Consumers have disposable income to spend but are choosing to save it,” Fulgoni says.

Apart from sales, however, retailers need to understand how consumers use the web to shop for both online and offline purchases. 74% of consumers told comScore they are likely to shop for a purchase online before they buy it. 70% say the Internet is important to providing information and a surprising 48% say it is more important than a year ago. “This says it all,” says Fulgoni, who is speaking at the Internet Retailer Conference & Exhibition, June 15-18 in Boston in a session entitled Understanding Consumer Behavior in an Uncertain Economy.

Other points that Fulgoni highlighted in the webinar:

  • Chains are losing share by not focusing on the Internet year-round. He noted that the share of chains’ online sales went from 44% in the third quarter of 2008 to 48% in Q4 and then fell back up to 44% in Q1 2009. Two possible explanations: Less frequent shoppers buy online in the fourth quarter and they go to brands they know. Or, more interestingly, Fulgoni says comScore sales people have heard from chain managers that senior executives focus more on the Internet in Q4 and provide more resources to online marketing during that period, then their interest wanes in Q1.
  • Video has a big impact on sales. Consumers who view a product video spend 20% more online than those who don’t.
  • Retailers who combine a search marketing strategy with an online display ad strategy have a 119% lift in offline sales, while those do search alone get an 82% lift and those who do online display alone get a 16% lift.
  • Social media users spend 20% more online than the average Internet user. While that number is much lower than those for users of online classified ads (72%), sports sites (57%), blogs (47%) and business and finance sites (46%), there is an interesting huge disparity among users of different social sites. Twitter users spend 211% more than the typical Interne user, while Facebook users spend 19% more and MySpace users spend 17% less.

    While Fulgoni says that so many pending factors-unemployment, government stimulus, consumer expectations about when the job market will recover-make predicting online sales growth this year difficult, he expects 5% growth in web sales in the second half of 2009. Noting that Q4 online sales were down 3% year over year, and that January and February sales were up 2%, while March was down 1% and April sales were flat, Fulgoni says: “I think we’ve bottomed out.”

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