Holiday Spending Online Will Again See Double-Digit Increases

This holiday season’s deal-seeking shoppers in the U.S. are expected to spend $68.4 billion online, representing a 15 percent increase over 2011.

“E-commerce has been on fire since its inception and it still continues to grow and outpace the overall retail economy,” said Sucharita Mulpuru, an analyst with Forrester, who studied recent trends to come up with this year’s holiday forecast. “And because e-commerce is growing so much faster, it’s taking share from the offline world. It takes more share during Q4 than the rest of the year.”

In the report, Mulpuru concluded that the number of online shoppers in the U.S. will grow a modest 3 percent, but that the average shopper will spend $419 online this holiday, a 12 percent boost over 2011.

Overall, if spending does increase 15 percent this holiday, the rate of increase will be flat compared to the prior year, but the gains are still very impressive given the much larger base (see chart below). It also points to the fact that e-commerce still makes up only a small fraction of overall retail spending.

There are three factors driving consumers to spend more online this year:

  • Online vs. offline: Customers would rather shop online to take advantage of the sales and to avoid crowds.
  • Mobile commerce: Smartphones and tablets will likely make up 40 percent or more of traffic to a retailer’s site on the major shopping days as consumers get offers sent to them by email and check them out wherever they are. Still, conversion rates are fairly low, Mulpuru said.
  • The economy: Overall, holiday retail estimates are extremely positive and consumer confidence scores hit a six-month high in October.

Still, the trend largely benefits online-only retailers, like Amazon, which means that physical retailers must come up with a plan to keep consumers coming to the stores or their Web sites.

Target and Best Buy are two of the big-box retailers that have committed to matching online prices to prevent “showrooming,” where people scan barcodes in the store to find better deals for the same product online. PayPal is also supporting price matching for customers who use the payment provider to make purchases. And Walmart is experimenting with same-day delivery in some markets to fuel its online transactions.

Mulpuru said she wasn’t sure if stunts like that would move the needle, but agreed that “the biggest reason why Amazon is gaining share is because of price, free shipping and doing it quickly.” She said Amazon is willing to subsidize those costs and to spend more to acquire and retain those customers. However, she said, there is some backlash from manufacturers. Companies like Samsung and Sony have started a universal price protection program, where they guarantee the same price no matter where you shop.

“That’s been long overdue,” she said. “There’s been a lot of monkeying around with what’s the right price. With mobile, price is transparent. Up until now, the manufacturer hasn’t had to enforce pricing.”

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Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work