Doom and Gloom for Retail Sales, Both Online and Off

This economy is horrible, and I think it will get much worse next year.

While I haven’t seen revisions of the rosy 10%+ growth predictions for online sales from a number of research firms, Piper Jaffray’s October Research report on ‘The turbulent teen years of eCommerce’ explains the harsh reality of the current economic environment.  While Piper Jaffray expects “online sales to continue to take consumer wallet share from bricks and mortar stores, growing 5%-6% faster than total retail sales in the near term,” that doesn’t mean much when total retail sales are slumping dramatically:

According to the commerce department (via Market Watch), online sales, excluding auto sales, dropped 2.2%:

“Sales of durable goods remained weak. Sales at furniture stores dropped 2.8%, sales at electronics and appliance stores fell 2.3%, and sales at hardware stores fell 0.4%.  Sales at the mall were horrible. Department store sales dropped 1.3%, clothing store sales fell 1.4%, and sporting and hobby stores sales fell 1.6%.”

So back to Piper Jaffray’s report.  According to Gene Munster’s team, eCommerce sales “will decrease 2% year over year in the fourth quarter of 2008, and will be flat in 2009 before turning the corner and growing 5% in 2010 when the economy recovers.”  Take that in for a second.  We’re not talking about the 17-21% growth (increase) we saw from the 4th quarter of 2006 to the fourth quarter of 2007, but a drop.  Ok, sometimes I spell out the obviousl over and over again, but I want to be extremely clear here.

Forget about Wall Street for a second.  This economy is driven by consumers.  Consumers who are over their heads in debt, with rising credit card rates (Citigroup will not be the last to raise rates), who don’t have jobs (this number will rise), whose houses are underwater.

Or just put it this way, no job –> no money –> no sales (online or offline) –> no good for businesses –> which leads to more businesses going under.  Techcrunch might have the layoff tracker, but I think we need the retail distress tracker.  Circuit City is the first victim…and the holiday season hasn’t even started.  Who’s next?

Comments

[User 283977:]

Good article... here is another point that might merit consideration...

The recession is putting a lot of pressure on city and state governments to raise sales tax. This is what is happening in California. The Internet provides a way to avoid those increases, and with the price of oil down, shipping costs are going down... Based on this I would reason that while retail sales are going to decrease, Internet sales should drop less. In a way, the recession should accelerate the transfer of proportion of sales from brick and mortar retail to Internet retail.

2008 Nov 14 05:06 PM

[Roger Knights:]

Another reason Internet sales should grow is that some consumers who previously bought at a store because they enjoyed the shopping experience or were intimidated by navigating the net will now be more concerned with pinching pennies, and will do more shopping online, where it's cheaper.

2008 Nov 14 10:27 PM

[Roger Knights:]

Another reason Internet sales should grow is that some consumers who previously bought at a store because they enjoyed the shopping experience or were intimidated by navigating the net will now be more concerned with pinching pennies, and will do more shopping online, where it's cheaper.

2008 Nov 14 10:27 PM

[who:]

rent will get cheaper, stock will get cheaper, wages may decrease or at least the wage bill will decrease with lay offs and margins decrease, hence it will be cheaper to buy from shops...e-commerce will need to react.

2008 Nov 16 07:08 AM