Posts by Patti Freeman Evans from May 22, 2008

Pfreemanevans | May 22, 2008, 10:28 PM
Update on Online Retail in Light of the Current Economic Situation

We continue to hear from economists that the rise in prices for gas and food-staple prices here in the US is driven by largely global demand. Coupled with that is a softening US job market and sagging home prices. Customers will continue to feel a squeeze in their pocketbooks.

Conflicting reports about the prospect or fact of a recession in the United States abound. Either way, the above factors will likely continue to pressure the American consumer for some time. And the media continues to emphasize the extremes of the situation, ratcheting up negative consumer perception.

In fact, according to a recent JupiterResearch consumer survey 36 percent of online users plan to reduce their spending online this year. On average they plan to reduce their spending by 5 percent. Though these figures show the impact of the overall economic situation on the consumer perception, we have not seen reduced online spending behavior materialize in aggregate, to date. Jupiter firmly believes that the overall online retail arena will remain health, growing 15 percent over last year.

Recent retailer earnings reports bear this out. A few examples of online only company that have reported first quarter results are: Amazon (net sales up 37%), eBay (24% increase in net revenue, 12% increase in GMV), Bluefly (14% increase in revenue with a 2% increase in AOV and 12% increase in the number of transactions). Overstock (25% increase in GMV). Furthermore, anecdotal evidence from retailers and vendors serving online retailers shows that across the board retailers are not experiencing overall softness in their online sales. .

Not all retailer news is rosy. An exception to this sustained performance arises in a category that is perhaps particularly sensitive to challenging economic conditions: fine jewelry. Bluenile, generally a retail website that exhibits best practices, has seen increased sales this year, but not at the same pace as in years past. Bluenile reports 5% increase in Q1 net sales, vs. 34% and 30% Q1 increases in 2007 and 2006 respectively. But, the overall picture remains positive as evidenced by the US census bureau Estat (www.census.gov) numbers show a 14% increase in year over year sales for first quarter 2008.
By Patti Freeman Evans, Vikram Sehgal