Coremetrics, which covers online sales activity, says that Cyber Monday sales rose 20% this year over last based on data taken through 6 PM. That would make e-commerce revenue for the day about $1 billion. The number surpasses most estimates. The gain may make sense if shoppers do indeed flock to retail websites in greater number on Cyber Monday than on any other day of the year.
Online measurement service comScore says it expects more shoppers to go to online retail sites because of better discounts than last holiday season and free shipping. Both of these may be magnets for consumers, but they are costly to the retail industry.
Shares in Amazon.com (NASDAQ: AMZN) hit an all-time high on Cyber Monday, in anticipation of a surge in sales. But, some experts question whether Amazon will make a great deal of profit on that revenue. Many of its promotions are for consumer electronics devices led by the Kindle. The e-reader’s base price is $139, which may be little more than the cost to build it. The Kindle could be a loss leader set to drive traffic to the 750,000 e-book library of the world’s largest e-commerce site. The Kindle promotion may also bring in other customers as well. Walmart.com, the second largest e-commerce site in the US, may also have offered some products at huge discounts to bring consumers to its site and the company’s stores.
It is easy to ignore that Amazon operates on small margins, during the excitement over a substantial increase in sales. It made only $231 million in its last quarter on $7.6 billion in revenue. Much of its net income could be eroded by discounts and expensive free shipping.
The future of e-commerce gets brighter as each holiday passes. Growth in the industry handily beats that of bricks-and-mortar stores. But, online sales may not be as attractive as they seem if most sales are done at a loss and e-commerce sites hope to make that up on volume.
Douglas A. McIntyre
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