RSSOnline Retailers Facing Huge 'Cyber Monday'
By Scott M. Fulton, III | Published November 27, 2006, 12:45 PM
Online shopping may not seem to have existed long enough for researchers to detect year-to-year patterns, yet if the past few years are any indication, the Monday following the Thanksgiving holiday tends to be the day of heaviest traffic for Internet-based retailers. And if "Black Friday" - the wee hours of the morning after Thanksgiving - represents the beginning of a trend this year, servers should expect a tremendous flood.
According to raw data from comScore Networks released this morning, US consumers spent nearly $2 billion online in just the past week alone. For the month of November leading up to last Friday, consumers spent $8.31 billion - a 24% jump over 2005. Black Friday spending, according to comScore, rose 42% over the prior year. While comScore does not generate forecasts, a simple linear analysis based on its data would indicate that, if this trend holds out, US consumers could spend another $2.74 billion just this week, resulting in a huge "Cyber Monday" for retailers.
Payment processing firm Retail Decisions reported its Black Friday traffic spiked 109% higher than for the previous year's day-after-Thanksgiving, specifically at 2:53 pm Eastern Time.
A recent Forrester Research report predicted online holiday spending would rise by 23% this year, so the comScore data is right in line, if not a tad higher. And trends observed by PriceGrabber.com, which provides branded referral to Web sites, reveals some consistent numbers as well: Referral traffic there has increased by 45% over the previous year.
What's important about the PriceGrabber numbers is the breakdown: Among the strongest gainers, video game sales have increased 64% over the prior year, though by comparison, the toy category is the star of the year with a 225% increase, followed by sporting goods at 178%. Judging from last Friday's figures alone, digital cameras represented the strongest single sales category, followed by LCD and plasma TVs, and MP3 players. Electronic toys (as opposed to video games) ranked fourth, while notebook computers placed a surprisingly strong fifth.
Tenth on the list - which, among hundreds of categories, is still a fine place to be - is the Xbox 360 and its accessories. It's the only category on PriceGrabber's list that is identified by brand name (notice, MP3 players are not subcategorized as "iPod" and "other"), which is the clearest indication thus far that Sony's much publicized PlayStation 3 rollout - with far fewer units available than the company originally hoped - probably ended up boosting its principal competitor instead.
With regard to traffic as opposed to sales, a Nielsen NetRatings report released this morning showed Black Friday traffic increasing by 12% annually for the nation's leading online retailers, though it was eBay - not exactly a "store" - that received the biggest chunk of that growth. That site took in 7.5 million unique visitors last Friday alone, with Amazon.com taking in 3.4 million and Wal-Mart.com taking in 3.2 million.
Investors may be seeing this as bad news, because Black Friday traffic for 2005 increased by 29%. But one of the problems with tracking by percentage alone is that it assumes a kind of automatic population growth of 100%. Think of it this way: If you start out with 100 one year and have 200 the next, you have a growth rate of 100%. But if you have 300 the following year, your growth has declined to 50%.
In a report conducted by BIGresearch for Shop.org, released this morning, 8,090 consumers were asked about their shopping preferences. Over half (50.7%) responded they intend to do at least some of their holiday shopping from work, up from 44.7% the previous year - a gain of 17%. Young adults, not surprisingly, constitute the strongest online shopping segment in this survey, representing nearly three-fourths of the positive respondents.
What could spoil the holiday spirit this year? Though a poll conducted of its customers by eToys Direct indicated 27% of customers intend to spend more this year online than in previous years, the two leading factors weighing on their decisions are personal finances and gas prices, the latter having taken a recent and welcome downturn. But with OPEC ministers threatening this morning to cut production, crude oil prices are on the rise, at least this morning.
And while inflation is now non-existent (the Labor Dept. estimates an annual CPI of -0.5% for urban area prices, including energy) and unemployment is hovering at only 4.4%, the extent of consumers' rising confidence remains under scrutiny. As credit reporting service Experian reports this week, fewer Americans are obtaining credit cards than in previous years. With demand for credit declining, you'd think the price of credit would fall along with it. That doesn't appear to be the case this week, with the average standard fixed credit card annual rate stuck at just over 13%.
It may be way too early to draw conclusions, but one possibility being explored is the likelihood that consumers drawn to online commerce are being drawn away from traditional retail commerce. As Wal-Mart reported this morning, while the number of Black Friday customers rose over last year, based on early indications, its actual sales may have fallen, over numbers that were already declining.
It only makes sense that online shoppers are looking for bargains. Assuming they've found them, it can only follow that sales margins are dropping, which isn't necessarily a good thing for retailers.
Factors such as these are provoking analysts such as Lee A. Diercks of consulting firm Clear Thinking Group to play contrarian. "This holiday season will not be as robust as last year," Diercks said in a statement released this morning. "While we still see growth, there are numerous factors compressing retail sales." The four Diercks lists are: higher oil prices, the sharp slowdown in the housing market, higher credit card and mortgage interest rates, and the one retailers hate most: lower margins. Steep price declines this year, particularly in electronics, Diercks said, "will require retailers to sell significantly more units to even get back to last year's sales levels."
On the "glass-is-half-full" side of the equation is Ernst & Young partner Aubie Goldenberg, who predicts a strong retail season overall, leading to a spillover effect that will benefit online shopping. The factors Goldenberg sees boosting sales this year...are familiar ones, strangely: "Sales will be stimulated by low unemployment, greater consumer confidence, declines in energy prices from the record highs earlier this year, and recent gains in the bond and stock markets that could have a positive 'wealth' effect." Bond markets are often positively affected by higher interest rates.
What's clear from the early numbers is that online shopping this year is benefiting from something, whether it's good news about the economy or bad news about the economy.
Its crazy I cant even put my orders in with my distributer. Traffic is crazy all over the net...
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F.Y.I.
From Wikipedia.
The term "Cyber Monday" is a neologism invented by the National Retail Federation's Shop.org division, and was never in common use within the ecommerce community before the 2005 holiday season.
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