A sobering forecast from online metrics firm comScore suggests that the economic downturn could have a worse impact on the Internet retail sector this holiday season than previously thought.
The firm’s latest analysis found that e-commerce spending for the first 23 days of November was down 4 percent from the same period last year, and looks for flat growth throughout for the holiday season as a whole.
“Despite the recent reprieve that plummeting gas prices have given American consumers, the depressed and volatile stock market, declining housing prices, inflation and the weak job market all represent dark clouds hanging over their heads this holiday shopping season,” comScore Chairman Gian Fulgoni said in a statement.
Calling the first three weeks of November “disappointing,” Fulgoni suggested that online shoppers might buy later in the season in anticipation of retailers offering more aggressive discounts.
Online retailers have already signaled their plans to compete through promotions such as free shipping and merchandise discounts this holiday season.
comScore’s projection is a stark comedown from earlier numbers offered by Forrester Research, which recently estimated that e-commerce spending this holiday season would see a 12 percent increase over last year.
A 12 percent growth rate, which would be an enviable mark for traditional retailers, was an alarm bell for the online industry that last holiday season had seen spending jump 19 percent from 2006 and larger increases in previous years.
As the economic realities begin to hit home, online merchants are revising their strategies to court more budget-conscious consumers. In addition to discounts and shipping offers, retailers are also advised to expand their presence to other popular destinations on the increasingly social Web.
“In challenging economic times like these, reaching out to consumers through social sites is a smart complement to your overall online strategy,” said Lisa Joy Rosner, vice president of marketing for MyBuys, an e-commerce consultancy. “But the most important thing, as we know, is to know your customer and target them in the right place with the right offer,” Rosner told InternetNews.com.
Similar advice comes from Wigix, an online marketplace that bills itself as a competitor to eBay (NASDAQ: EBAY).
“Nowadays, it is important for retailers to reach out to Web users through social sites and with tools like shopping widgets because both play major roles in the next generation e-commerce fabric,” Wigix CEO James Chong told InternetNews.com.
Rosner added, “At the end of the day, knowing what your customer wants and targeting them at the right time, in the right place with the right offer, usually leads to a sale.”
[cob:Special_Report]While retailers look to spread their presence across the Web to encounter shoppers on an array of sites, the net drop in spending in November is alarming news. comScore polled shoppers and found that nearly half plan to buy fewer, less expensive gifts this year.
For an industry where double-digit growth have become the norm, a material decline is unprecedented. Looking ahead, Fulgoni offered some very cautious optimism.
“Assuming the stock market doesn’t deteriorate materially during the season and that there is no apocalyptic news of major financial institutions, manufacturers or retailers failing, we should see online spending growth inch back towards positive as we get deeper into the season,” he said. “However, if there is any more significant bad news just over the horizon, all bets are off.”