Will Holiday Online Spending Yield More Revenues and Profits?

Retail

Published: December 17, 2014 3:06 pm

Last Updated: April 28, 2020 10:33 am

As of Sunday, December 14, U.S. consumers had purchased nearly $42.5 billion in goods since November 1 using desktop computers. That is a gain of 15% compared with the similar period a year ago, and it does not include purchases made from mobile devices including smartphones and tablets.

Sales on Cyber Monday, the day following the Black Friday weekend, topped $2 billion for the first time ever. That has been the top sales day of the holiday season so far, trailed by Tuesday, December 2 and Monday December 8, dubbed Green Monday. The data were reported by comScore.

One last big promotional online shopping day remains: Thursday, December 18, known descriptively as “free shipping day.” After that, comScore’s chairman emeritus says, “the online holiday shopping season should start winding down.”

While it is true that online spending increases each year, the online retailers must be feeling some of the same margin pressure as their brick-and-mortar peers. In its fourth quarter last year, Amazon.com Inc. (NASDAQ: AMZN) posted net profit of just $240 million on more than $25.5 billion in sales, a net margin of less than 1%.

Wal-Mart Stores Inc. (NYSE: WMT) said that in its fourth quarter ended in January 2014, the company’s online sales contributed 0.3% to same-store sales growth in the United States, but same-store sales throughout the country — including e-commerce — fell 2.4% and overall net income declined almost 21%. Walmart’s overall profit margin in the quarter was about 3.4%.

Amazon rarely seems to care whether it makes a profit, but most retailers are like Walmart in that they cannot afford to clip their operating margins significantly with promotional items like free shipping. If they do, the profits could evaporate.

Once the online shopping season throttles back after free-shipping Thursday, brick-and-mortar retailers will be looking at Super Saturday, December 20, for a final big boost to sales.

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