Despite Increases, Online Sales Growth Slowing

Online sales for the eight weeks ending Dec. 7 were up 31 to 34 percent year-over-year, to an estimated $10.8 billion, according to investment research firm Goldman Sachs, but online sales growth is slowing.

In an advisory to clients, GS said that its latest figures put e-commerce sales in-line with its full-year 2001 estimate of $32.2 billion, which would be a 20 to 25 percent jump from the year before.

Still, the increase is less than it could be, and GS analysts said that “there is no change in our outlook for a deceleration in online sales growth …”

“… we continue to expect online sales will mirror the slowdown in overall consumer spending with growth for online sales for … 2001 of 20-25 percent, down from a 68 percent increase in 2000,” GS said.

Goldman’s estimates cover most of the major pure-play e-commerce and online travel companies, but not all online sales efforts.

“For eBay, per our mid-quarter study and weekly listings analysis, we continue to expect a strong quarter with sales at least in-line to above our increased estimate of $215 million, which we increased from $206 million on Nov 26,” GS said.

For, “…we are maintaining our estimate for $1.01 billion (in sales), a 4 percent year-over-year increase, a significant slowdown from the 44 percent increase in the fourth quarter of 2000,” analysts said.

For 1-800-FLOWERS.COM “we believe the company remains on track to achieve revenue of $170.3 million, a 27 percent year-over-year increase vs a 15 percent year-over-year increase recorded for the fourth quarter of 2000,” GS said, adding that “Accordingly, we remain selective for e-commerce companies, recommending eBAY and 1-800 Flowers due to diversification of revenue sources, clear leadership, pricing power and operating leverage enabling them to drive both top and bottom line growth in this environment.”

“As we have indicated in the past, we believe online commerce appeal remains limited to early market given just 18-20 percent household penetration for online shopping,” GS said.

“We look for continued improvements in convenience (driven by broadband at home access), ease of use, security, and overall appeal in order for e-commerce to ‘cross the chasm’ and reach the mass market.”

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