The Great Debate

Ecommerce loses immunity to economy woes

Eric Auchard

Nov 27, 2008 15:37 EST

— Eric Auchard is a Reuters columnist. The opinions expressed are his own –

For years, Web retailers have touted their convenience and efficiency over conventional retailers, and enjoyed surging double-digit sales growth, especially in the crucial year-end holiday shopping season.

But the steady draining of consumer confidence reflected in recent government data and the latest market research reports suggest the online retail industry is bracing for a humbling first-ever year of flat or even contracting holiday sales. Ecommerce, for reasons tied to both the global economic crash and Web-specific factors, is poised to fall harder than the much maligned retail store industry, itself struggling with recent high-profile bankruptcies and widespread signs that consumers are looking to sharply curtail their spending.

“Retail spending has not really dropped,” says Gian Fulgoni, chairman of consumer audience measurement firm comScore Inc. “It’s ecommerce growth rates that have fallen off a cliff.”

This week, comScore once again cut its forecast for U.S. holiday shopping, reporting that sales in the first 23 days of November had fallen to $8.2 billion, down 4 percent from a year earlier.

Forecasts for online holiday shopping issued in October or early November took the “glass half full” view of the coming shopping season — predicting low double-digit growth. That would be below prior years, but healthy versus overall retail.

The declining outlook comes after third-quarter U.S. Department of Commerce data showed dismal October growth online. Forecasters who had clung to the notion that online retailers would prove an exception, have changed their tune recently.