Online Spending Sags, But Not As Much as Overall Retail Sales

It's no surprise, but it's still significant: retail electronic-commerce sales declined by more than 5% in the fourth quarter, the U.S. Commerce Department's Census Bureau reported this week. “This is the first-ever quarterly decline year over year,” a Census Bureau spokesperson tells Digital Transactions News. The bureau began tracking e-commerce in 1999. The Census Bureau's preliminary estimate puts retail e-commerce sales at $31.9 billion for the quarter, down 5.5% from $33.8 billion in 2007's fourth quarter when adjusted for seasonal variations, trading-day differences, and moving holidays. And despite the fourth traditionally being the biggest retail quarter of the year, e-commerce fell by 5.7% from the bureau's revised estimate of $33.9 billion in the third quarter. The Census Bureau compiles its estimates from random surveys of 12,500 retailers that report orders or negotiated sales over the Internet, though actual payment is not necessarily online. The vast majority of retail e-commerce, however, is charged to credit cards, signature-based debit cards, or online alternative payment systems such as PayPal Inc. The bureau's survey does not include online travel services, financial brokers and dealers, and ticket-sales agencies. The government's estimate largely confirms reports from other online researchers as well as recent numbers from the payment card networks showing that overall spending fell on credit cards and flattened on debit cards in the fourth quarter as the recession deepened (Digital Transactions News, Feb. 5). But the bleak data show mostly that e-commerce is reflecting what's going on in the overall economy rather than that consumer preferences are reverting toward physical commerce, according to Bruce Cundiff, senior analyst at Javelin Strategy and Research in Pleasanton, Calif. Cundiff cites the Census Bureau's estimate that adjusted overall retail sales fell by a much greater amount in the fourth quarter, 9.1%, to $938.1 billion from $1.03 trillion a year earlier. “The most important thing to note is I don't think this is a reflection of the online channel,” he says. “We saw this coming.” E-commerce accounted for 3.4% of total retail sales in the fourth quarter, up slightly from the 3.3% share it held in the preceding four quarters. While many online merchants and the Internet sites of store-based retailers suffered last year, a few thrived, especially e-commerce leader Amazon.com Inc. (Digital Transactions News, Feb. 5).