E-tailers Await Fall Buying Frenzy
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Do strong sales in July at your local Gap store or car dealership translate into good news for e-tailers in the upcoming holiday season?
The answer is yes.
Commerce Department figures released Thursday show that total retail sales rose by a higher-than-expected 0.7 percent in July.
"What it says is that the economy is sound and people are buying," according to Promod Haque, a general partner at Norwest Venture Partners. "And that's good for online retailers, because the number of purchases made through the Internet is growing dramatically."
For e-tailers, July's retail sales give them even more reason to look forward to the fall shopping surge. The E-tail sector has lagged behind most others all summer. During the current slump, only the Portal sector has averaged markedly higher average losses per share. And in the four-week rally that sent Internet stocks soaring into early July, e-tailer stocks gained far less ground on average than those in any other sector.
Part of that is seasonal, of course. Retail sales usually soften during the summer months. But the sector also has been plagued by concerns about cutthroat pricing eliminating all but a handful of players, and the perilous fall of Amazon.com, whose stock trades today at less than 50 percent of its value in late April. Amazon.com, at least for now, is seen as a bellweather stock for the Internet in general, and e-tailers in particular. The market's reservations about the reigning online retail king dampens enthusiasm for the entire sector.
E-tail stocks probably will continue to flounder at least through this month. The big hurdle to get over comes Aug. 24, when we're expected to find out from Fed Chairman Alan Greenspan whether there will be a hike in interest rates.
After that, the year's real buying season begins, and you can expect more purchases than ever through the Internet, and increased optimism among investors about the future of online retailing. Don't be surprised to see the e-tail sector leading an Internet rally by October or November.
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