The apparel chain filed for bankruptcy in January and closed its e-commerce site and stores.
Online sales represent an ever-larger share of retail sales, but e-commerce is growing more slowly than in the past and there`s no telling how long that might continue, comScore`s Gian Fulgoni tells Internet Retailer conference attendees.
First the good news for online retailers: E-commerce continues to take a larger piece of the total retail pie. Now the bad news: It is growing at much slower rate in today`s economy. What`s still unclear is how long the slump will last, comScore Inc.`s Gian Fulgoni, said today at the Internet Retailer Conference & Exhibition in Boston.
"Clearly the consumer is behaving differently today," Fulgoni, chairman of the Internet usage measurement company, said in his presentation. "What is uncertain is if the changes in spending will be permanent changes."
Fulgoni said online retail spending was flat in the first quarter of 2009 compared to a year earlier at $31 billion, while total retail sales fell 5%. E-commerce grew at a 17% rate over the prior year in Q1 of 2008.
So, why are online shoppers spending less? In addition to the sour economy, Fulgoni says higher prices for gas and groceries have eaten into e-commerce revenue over the past year because they are necessities not typically sold on the web.
"E-commerce is about disposable income, and gas and groceries are eating away at disposable income," he said. And while gas prices have dropped in recent months, Fulgoni says, recent data shows them creeping up again, rising 11% from March to April.
And, comScore`s recent survey from April survey showed consumers are still worried about their financial future, four in five consumers are more afraid of their economic future than ever before.
Consumers in all income brackets cited job security as their upmost concern, with 44% of those earning $100,000 or more saying it was their No. 1 worry, 50% of those earning $50,000 to $99,000 and 44% of those earning under $50,000. Consumers in general feel it will take more than a year for the unemployment rate to rebound, Fulgoni said.
Such fears are showing in comScores`s more recent online sales figures, in May, online spending online spending fell 4% from a year earlier, in April growth was flat, Fulgoni said. He said the fall-off from the first quarter may indicate that retailers boosted sales early in the year with heavy promotions of overstock merchandise, but have cut back on deals now that they have less inventory on hand.
What may concern e-retailers the most is spending by segment, Fulgoni said. Older, wealthier consumers are spending less, likely because they are to rebuild the wealth they have lost from falling stock and home prices, he says. Consumers 45 years and older earning $50,000 to $99,000 decreased their online spending by 11% year over year in Q1, and those in the same age range making $100,000 or more kept their online spend flat.
Still, amid all the gloomy reports, there is a bright spot. The Internet is growing in importance to consumers. Seven in ten consumers say the Internet is important to them, and 50% say it is more important than it was a year ago.
When it comes to shopping on the web, 74% said they look online before purchasing in a store and that search engines are the sites that are most important to them when buying online. Additionally, 16.9% of online sales are driven by search, up from 14.3% a year earlier, making it the No. 1 online sales driver. E-mail was second and comparison shopping third. Amid the economic downturn, visits to online coupon sites are growing, Fulgoni points out.
Fulgoni also suggested that multichannel retailers combine online search and display ads. He says retailers that combine search and display campaigns experienced a 119% lift in incremental offline sales, compared with 80% for search only and 16% for display only.