Costco’s (COST) same-store sales fell 7% last month. The firm was lucky. Abercrombie & Fitch’s (ANF) numbers were down 38%. Saks (SKS) plunged by 16.3% and Neiman Marcus fell 27.3%. July was a sign that all but a few retailers particularly Wal-Mart (WMT) are continuing to watch the year slip away from them.

There was a chance, a promise that e-commerce activity would salvage the retail sector. The increase in revenue from online retail websites averaged 20% in 2007. In the first half of last year, the number fell but was still 12%. There was no increase in the fourth quarter of 2008 compared to the same period the year before. The figures from comScore are in for the second quarter of this year, and online retail sales actually dropped 1% to $30.2 billion, which is astonishing given the robustness of the business just a year ago.

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The retail industry learned an unpleasant lesson this year. The Internet is not a cure-all, but the schooling is even harder than that. Once every retailer is online with complex, well-tested websites, none of them has a significant advantage. The competing store fronts have moved from the street level to the PC. Whatever edge e-commerce gave the early movers has become lost. Every big retailer knows all the internet sales tricks.

It will be interesting to see what the retail industry will do with the internet now that it is no longer new and no longer a way out of selling aisles of products in physical stores. The internet is just a mall without a parking lot and its perceived value as the next generation of retailing is entirely gone.

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Executive Producer:  Philip MacDonald

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