Shopping Increasingly Moves Online With a Spike in Flash Sales and Group Buying

As consumers scavenge the Web for good deals, flash sales and daily deals are gaining in public awareness.

In comScore’s Q1 2011 State of Online Retail presentation yesterday, it said the e-commerce share of retail spending totaled 8.6 percent, its largest share ever, up from 8.1 percent in the year-ago period.

Specifically, the report paid attention to the impact of mobile shopping trends, group buying, such as Groupon and LivingSocial, and flash sales sites, like Rue La La, HauteLook (now owned by Nordstrom), ideeli and Gilt Groupe.

In group sales, also known as local commerce, users are offered 50-70 percent off a restaurant, spa or other service if they pay for a voucher in advance. In flash sales, excess inventory is sold at a discount until the merchandise is all gone. Both typically reach their audiences through daily emails.

ComScore found that both Groupon and LivingSocial have watched their online audiences triple in the past year. For Groupon, the bulk of deals sold, or 56 percent, are for restaurants. LivingSocial has a broader mix of categories, including books and magazines, which is its top category at 41 percent.

Groupon’s awareness is much greater than LivingSocial, comScore found, but both tend to sell the same percentage of deals. In the past three months, 60 percent of Groupon users have purchased a deal, compared to 55 percent of LivingSocial users.

A constant question is whether LivingSocial, which is backed by Amazon.com, is gaining on the leader Groupon, which is eyeing an initial public offering in the near future.

While both are rapidly growing their audiences, LivingSocial is seeing a slightly higher churn rate, which is defined as the percent of subscribers leaving the site. Groupon’s churn rate is 18 percent, and LivingSocial’s is slightly higher at 22 percent, according to comScore.

As for flash sales sites, at least 17 percent of consumers can at least name one, and among those who subscribe, 51 percent say they’ve made a purchase.

Rue La La, which is partially owned by eBay, saw the biggest jump in visitors to its site, increasing 131 percent year over year because of its broad appeal to both middle and high-end income households. The only site comScore tracked that lost unique visitors in March was ideeli, which reportedly saw 21 percent fewer visitors.

Overall, the e-commerce industry has seen positive gains for the past six straight quarters, year over year. In the first quarter, sales totaled $38 billion, up from $33.9 billion in the same period a year earlier.

It still makes up a very small slice of the retail industry, and going forward, could be negatively affected by inflation or a rise in gas prices as consumers dial back discretionary spending. ComScore estimates that for every 15 cents per gallon increase in gas prices, you can expect a 1 percent decline in e-commerce.

But perhaps rising gas prices will be offset by free shipping. For the past two quarters, nearly half of all orders didn’t charge for shipping.

Photo Credit: Coffee Core.


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