U.S. E-Commerce Penetrating Offline Retail Sales at an Accelerating Rate

Caris & Company analyst Tim Boyd addresses clients on the U.S. Census Bureau's E-commerce sales data for the recent ending quarter. His note follows:

The U.S. Census Bureau recently released its E-Commerce Sales data for 2Q'06:

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Our thoughts on the data:

1. On a Y/Y basis, e-commerce increased its penetration of offline retail sales by 36 bps – this represents the fifth consecutive quarter of acceleration in the penetration rate and the highest penetration increase since 3Q'02.

2. E-commerce now accounts for 2.7% of total retail sales in the U.S. – still a very small amount, suggesting that we remain in the early innings of a major secular shift from offline to online.

3. Although the Y/Y growth rate in e-commerce decelerated to 23.1% from 25.2% in 1Q'05, we view this as very modest deceleration, especially given the environment of rising interest rates and declining consumer confidence during the June quarter.

4. Among the stocks in our coverage universe, we view the data as most positive for AMZN, EBAY and NILE but note that GOOG, MSFT and YHOO should be benefiting as well.