Online Sales Grow, But Luxury Items Suffer

Online shopping for the period Nov. 1 to Dec. 21 grew 19% from a year ago, to over $26 billion, according to data from comScore Networks. Spending on one-time favorites jewelry and flowers fell from a year ago, while furniture and appliances sales grew 70%. “We are continuing to see online spending strength as we get deeper into the season, with the most recent five-day span ending December 21 exhibiting a 25-percent growth rate versus year ago,” said comScore Chairman Gian Fulgoni.

ComScore analyst Andrew Lipsman says a weak U.S. economic outlook is most noticeable in decreased spending on luxury items: “In better economic conditions, that category was growing faster.” Jewelry and watches sales were down year-over-year; flower sales fell 19%. “Maybe in these tough times with the economy, people are looking for things that may be a little more utilitarian,” one industry executive said. "I have never seen consumers more cautious, more bargain driven, more savings obsessed than I have this year," Britt Beemer, founder and chairman of American Research Group, said.

Another huge growth category was video games/consoles and accessories, which grew 129%. Book sales are up 16%. Also notable, comScore says households with annual income over $100,000 are spending 28% more online; middle class ($50k-$100k) are spending 17% more; while those with less than $50,000 in income have increased spending by just 10%.

Citigroup analyst Mark Mahaney notes that the unknown factor in sales growth is how heavy discounting will hit retailers' bottom lines: “The level of promotions online has certainly increased,” he said, “and that will clearly be a negative drag on profits.”

Retail ETFs Consumer Discretionary SPDR ETF (XLY), Retail HOLDRS ETF (RTH) and ST SPDR RETAIL ETF (XRT), among others (Retail and Consumer Goods & Services ETFs) offer U.S. investors broad retail exposure.

Sources: Press release, New York Times, Reuters
Additional Reading: U.S Holiday Sales Recession-Proof? • Retail Sales Softer (Ignore the Surveys)

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