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Consumer spending is continuing to shift to eCommerce

February 20th, 2009 Leave a comment Go to comments

US eCommerce for Q4 2008 was down by 4.9%, as compared to Q4’ 07, according to the Department of Commerce or 3.5% according to comScore. The comScore number excludes the significant online travel sector. Q1-Q3 had shown consistent growth (11%, 13% and 6%) leaving the year as a whole with a 6% growth for non travel and 9% for travel. Travel makes up 28% of consumer online sales.

The fact that online sales grew for 2008 as a whole is heartening for eCommerce as oppose to bricks and mortar retail which saw year on year growth for each quarter of 6%,5%,6% and -4%. The -4% is very significant as bricks and mortar retailers see a higher proportion of sales in Q4 than eCommerce retailers.

The difference between online and bricks and mortar is clearer in specific sectors with sports being down 3% for Q4 year on year in physical stores as oppose to Sports and Fitness being up 16% year on year for eCommerce. Unfortunately the categories used to assess bricks and mortar sales and eCommerce are not the same and some goods are more or less amenable to online sales but for categories such as Sports and Fitness there is significant competition between online and bricks and mortar sales and the disparity shows a continued migration to eCommerce.

Within online sales there is significant variation by product for example music, movie and video sales were down 34% for Q4, year on year. Office supplies, jewelry and event tickets were also significantly down for Q4 where as consumer electronics, games and sports equipment all grew year on year even in Q4.

For January ’09 there was a 2% growth for total eCommerce over January ’08 which is very encouraging as compared to the -3% fall for Q4 or the continued significant bricks and mortar declines in January.

The better figures are due not only to convenience and the better provision of information but also due to the better demographics of the online shopper. Only 19% of online spending is from those with an income of less than $50,000 partly because they are less likely to have a home computer. Online spending by those with incomes below $50,000 declined by 9% where as the online spending of those with all higher income brackets increased in January’09 over January ’08.

The  take away message is that the retail consumer is continuing to shift to online purchasing and we should expect to see firmer numbers from eCommerce during the recession as well as significant growth on recovery. The bricks and mortar retailers will remain under pressure and be required to innovate in order to benefit from the recovery of consumer spending.

The figures above are from the Department of Commerce and comScore who released their quarterly retail commerce report including Januar’s numbers yesterday.

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