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E-commerce expected to see a better holiday season
'Cyber Monday' expected to help draw strong turnout for online retailers
By Dan Gallagher, MarketWatch
Last Update: 12:00 PM ET Nov 29, 2009
SAN FRANCISCO (MarketWatch) -- After a relatively low turnout last year, online retailers are expected to have a better time of it in 2009 as more shoppers shift their spending away from traditional retail outlets.
In addition, online activity will be boosted by traditional retail companies offering more deals over their own sites to compete with Web-based outlets.
That trend could be apparent on Nov. 30 -- what's known as "Cyber Monday."
The term was coined by the retail industry a few years back to contrast against "Black Friday" -- the day on which traditional retailers hope their bottom lines for the year turn from red to black.
It refers to the Monday following Thanksgiving, when shoppers who have been hitting stores all weekend look for new deals over the Web.
Though many analysts dismiss the term as a gimmick, most concede that the day remains one of the busiest of the year for online retailers. At the very least, the turnout for online shopping sites on that day may provide an indicator to the health of the overall retail environment heading into the key holiday shopping season.
"It's sort of an invented phenomenon," Lazard analyst Colin Sebastian said of Cyber Monday.
"That said, in the last couple of years, it has become more important. It can be an important leading indicator for the rest of the year," he said during an interview.
In a note to clients dated Nov. 25, Sebastian that Monday's during the rest of December will also likely show strong online shopping traffic "as consumers often buy online following weekend store visits."
'There is still a lot of growth left in online retailing. We are not even close to achieving equilibrium in market share.'
Colin Sebastian, Lazard Capital Markets
Earlier this week, Internet tracking firm comScore predicted that total e-commerce spending for this year's holiday season would grow 3% from last year. For the first 22 days of November, online spending totaled $8.21 billion -- an increase of 2% from the same period last year.
"The beginning of the online holiday shopping season has gotten off to a positive start, which is a nice improvement over the slightly negative growth rates we've experienced through much of 2009," comScore chairman Gian Fulgoni said in a statement.
Fulgoni noted, however, that online spending this year "will likely be tempered by the stark reality of 10-percent unemployment and less disposable income in many consumers' wallets."
Others are more optimistic.
Forrester Research, for one, predicts that online retail sales will rise 8% during the months of November and December compared to the final two months last year. A report issued earlier this month noted that online "remains the retail industry's growth engine."
Price war
With growth in online shopping outpacing traditional retail, mass-merchants such as Wal-Mart WMT, Target TGT, Kohl's KSS and Best Buy BBY are working to build up their own online stores, to better compete with cyber-giants such as Amazon.com AMZN and eBay EBAY.
Amazon and Wal-Mart have taken their rivalry up a notch this year, working to undercut each other on prices for popular book titles and DVD releases.
Analyst Justin Post of Bank of America conducted a survey of top-selling books, video games, CDs, DVDs, toys and consumer electronics across major online retailer sites.
He found that Amazon and Wal-Mart had the lowest consistent prices -- and were "pulling away from the pack. Amazon was found to have the lowest prices on slightly more items than Wal-Mart.
"We see Amazon as best-positioned given lowest prices, broadest selection, and strongest search/buying experience," Post wrote in a Nov. 23 report to clients.
Sebastian of Lazard said that traditional retailers will always have some advantages over their online counterparts. But growth in online retailing will likely outpace the rest of the sector for the foreseeable future.
"You can argue that the Internet is more convenient, but it will never replace that last-minute gift, or if you need to try on some clothes," Sebastian wrote. "But there is still a lot of growth left in online retailing. We are not even close to achieving equilibrium in market share."
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