U.S. E-Commerce: Penetrating Offline Retail Sales At An Accelerating Pace

Includes: AMZN, EBAY, NILE
by: Tim Boyd

Caris & Company analyst Tim Boyd addresses clients on the continued rise of E-Commerce relative to total retail sales in the U.S., with online retail now representing 2.8% of that total. His note follows:

The U.S. Census Bureau just released its E-Commerce Sales data for 3Q06:

U.S. E-Commerce Continues to Increase Its Penetration of Overall U.S. Retail Sales

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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 sixth consecutive quarter of acceleration in the penetration rate and the highest penetration increase since 4Q02.
2. E-commerce now accounts for 2.8% of total retail sales in the U.S. – the highest level ever. And this is 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 20.9% from 22.9% in 2Q06, we view this as very modest deceleration given the large numbers involved.
4. Among the stocks in our coverage universe, we view the data as most positive for AMZN, EBAY and NILE but note that GOOG and YHOO should be benefiting as well.

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