Why E-Commerce Still Doesn't Count

There has been just as much written about e-commerce as there is about bricks-and-mortar sales this holiday season, if a quick read of online business sites and financial publications is any indication

E-commerce revenue is an astonishingly small part of total holiday sales, although that distinction is not made often enough. The large bulk of research about online sales may simply overwhelm data about old world retail activity which is more modest in its volume.

comScore, which publishes the most in-depth and widely distributed research on holiday e-commerce revenue,  puts out a nearly daily update about online spending activity for the last two months of the year. This is the period it defines as the time almost all people do their shopping for gifts for Christmas and the other year-end holidays.

The comScore analysis leads to a conclusion similar to what most research about people who shop in malls and stores does. Shoppers bought earlier than usual this year. Discounts offered by retailers spurred most of that activity. There is a chance that Americans have exhausted their modest credit and bank accounts. Fear of a slowing economy may also contribute to what could be a slow sales week before Christmas. Buyers, it seems, are out of money.

comScore reports that spending for the first 35 days of the 201o holiday season is up 12% to $17.5 billion. The last day of the measurement period is December 5. The percent increase would seem to be very important because store sales are not expected to grow much. The National Retail Federation forecast that holiday sales will be up only 2.3% to $447.1 billion.

comScore’s proof that e-commerce has gained a great deal of momentum is that Cyber Monday, which is typically the day of the year when people spend the most money “became the heaviest online spending day on record at $1.028 billion.”

Wal-Mart’s (NYSE: WMT) average daily sales are $1.12 billion, more than all the e-commerce sales in the US combined on Cyber Monday. Granted, Wal-Mart gets some of it revenue from overseas. The average daily sales number in the US is closer to $750 million. Heavy sales days during the holidays are higher than that based on the company’s quarterly filings.

Holiday sales figures from Target (NYSE: TGT), Costco (NASDAQ: COST), and Sears Holdings (NASDAQ: SHLD), which includes K-Mart and Sears stores, also show just how insignificant e-commerce revenue is in the US.

Analysts argue that e-commerce sales increase at a rate of nearly 10% a year now, and bricks-and-mortar sales grow at a rate closer to 3%. This hardly matters for the time being. Online sales are barely significant compared to the money brought in though sales in old world stores.

Douglas A. McIntyre