Online sales growth barely moves the needle in October

The economic slowdown is starting to seriously affect the online retailing industry. The latest: Online retail sales in October grew a scant 1% over sales in October 2007, Internet measurement company comScore Inc. reports. ComScore says it is the lowest monthly growth since it began tracking e-commerce in 2001 and October was the sixth consecutive month of lower growth than the month before.

“The overall softness in online retail spending was precipitated by curtailed spending across mid- to lower-income segments, with households earning less than $50,000 exhibiting negative spending growth compared to a year ago,” comScore says.

While the news in online sales was not good, it was even worse in total retail sales. The that retail sales, which include autos, gasoline stations and restaurants, decreased 3.3% in October from October last year. The National Retail Federation, the retailers’ trade association, reports that, excluding those three areas, sales decreased 1.3% year-over-year. Auto sales in October fell 25.9% from October a year ago, the Commerce Department reports.

“While rising prices remained consumers’ biggest concern in October, it’s clear that the increase in the country’s unemployment rate along with the shock of the financial market meltdown have had a negative impact on the psyche of the American consumer, and the effects were clearly felt in the online retail sector,” says comScore chairman Gian Fulgoni. “October represented the softest single month of online retail growth on record, and we can only hope that the recent sharp drop in oil prices will cause a continued easing of inflation and a strengthening in consumer spending as we enter the critical holiday shopping season.”

The decline in growth rate was precipitous, from a height of 28% in August 2007 to 1% only 14 months later. ComScore reports that October represents the sixth consecutive month this year of slowing growth rates: 2007:
June, 25%
July, 22%
August, 28%
September, 19%
October, 19%
November, 20%
December, 18%
2008:
January, 12%
February, 14%
March, 9%
April, 15%
May, 12%
June, 11%
July, 8%
August, 6%
September, 5%
October, 1%

For the three months of August through October, online spending grew 4% versus a year ago. In that time, spending declined by 3% among households making less than $50,000 a year. Households with income between $50,000 and $100,000 showed marginally positive spending growth of 1%, while those making at least $100,000 increased their spending at a healthy rate of 14%.

ComScore’s surveys in July and October reveal a marked shift in consumers’ top economic concerns. While rising prices remained the top overall economic concern in October, consumers have become increasingly worried about unemployment/job security and the health of the financial markets, comScore reports. Households earning at least $100,000 indicated that the state of the financial markets was their biggest economic concern, with a sharp increase from 14% in July to 49% in October. Those earning less than $100,000 showed marked increases in concern about unemployment and job security.

“It’s clear that worry, concern and even fear are the prevailing consumer sentiments at the moment, and this is causing all income segments to pull back their spending,” Fulgoni says. “With the financial markets still volatile and more job cuts looming, it would appear the only near-term ray of hope for this year’s holiday shopping season is that the sharp drop in oil prices will cause an easing in inflation and provide a much -needed boost in consumers’ spending power.”

www.internetretailer.com/