Online Holiday Spending Stumbles Over Fiscal Cliff
Feel free to blame Congress’s indecision about how to resolve the fiscal cliff problem for the softer-than-expected holiday shopping season.
According to comScore’s final tally for the November-December shopping season, spending for the two-month period totaled $42.3 billion, a 14 percent increase over 2011.
“This year’s growth rate is essentially on a par with last year’s,” said comScore Chairman Gian Fulgoni. “But despite many positives for the online sector, this year’s season did not quite perform up to our initial expectation for growth rates in excess of 16 percent as we fell a billion dollars short of our expected total of $43.4 billion.”
The research firm, which tracks online shopping habits over broadband connections in the U.S., said a slowdown occurred after Thanksgiving due to low consumer confidence.
“As it turns out, this December swoon coincided closely with a significant decline in the University of Michigan consumer sentiment index that was attributed in large part to consumers’ fiscal cliff concerns. You might say that had it not been for Congress, every other indicator suggested it would have been an even merrier Christmas for online retailers,” Fulgoni said.
This season’s high points included some particularly outstanding days for online retailers, including Cyber Monday, Nov. 26 ($1.5 billion); Monday, Dec. 17 (up 76 percent to $1.013 billion); and Christmas Day (up 36 percent to $288 million). But those good days could not make up for three solid weeks in which the growth rates failed to surpass 12 percent.
Here’s a week-by-week breakdown of spending this season. A noticeable lull is present during the middle weeks:
This softness may have been expected based on preliminary results that some retailers released this morning. The figures indicate that sales may have been soft for many in December, not just online retailers.
For instance, Target said sales in December were flat; and Wet Seal, Macy’s and Kohl’s either cut their fourth-quarter outlooks or said quarterly results will be at or near the low end of their previous guidance range, according to MarketWatch.
Online sales are still growing at a much faster clip than retail as a whole. For instance, overall, December same-store sales, excluding drug stores, rose 4.8 percent, according to data from Retail Metrics.
While comScore’s report may be disappointing to some, it won’t affect all online retailers evenly.
For one thing, comScore’s results don’t include purchases made over mobile phones. Mobile commerce, which includes orders placed on tablets and phones through mobile browsers or applications, were a highlight for many retailers this holiday season. Second, there will be some retailers that overperformed and others that lost share.
As an example, Baird Equity Research’s Colin Sebastian raised eBay’s price target earlier today to $60, up by $2, based on evidence that eBay and PayPal excelled during the holiday season. The company’s full results will be out on Jan. 16.
And the one to watch closely will be Amazon.
Many brick-and-mortar companies resolved to fight the giant e-tailer by guaranteeing to match online prices. Whether that had any impact is still not known. Additionally, there was some question earlier this holiday season if Amazon was performing as well as expected.
Wells Fargo Analyst Matt Nemer said that for the first time in years, Amazon was giving some customers coupons for 10 percent off their orders. But it was unclear whether Amazon was only trying to reactivate old customers or if it was doing it because sales were short. Another plausible reason was that customers were procrastinating. Amazon allowed some customers to order as late as Dec. 21 with the promise of delivery by Dec. 24, which may have delayed some purchases.