INTERNET &
TECHNOLOGY

BY PETE BARLAS

INVESTOR'S BUSINESS DAILY

Posted 12/1/2008

Online sales are expected to slow this holiday, but it won't be because of a lack of action on Monday.

Consumers flocked to e-commerce sites on the day known as Cyber Monday, overloading some Web sellers as buyers searched for rock-bottom bargains to ease the burden of stretched wallets.

On Monday, visits to retail Web sites in North America peaked at more than 3.1 million per minute, 6.9% more than the peak of 2.9 million on the same day a year ago, says Akamai Technologies, (AKAM) which provides services to speed content delivery online.

The Web sites of such sellers as Victoria's Secret, Dell (DELL) and Williams-Sonoma (WSM) all had at least minor problems due to the onslaught of shoppers, says Gomez, a research firm. IBD also found temporarily unreachable sites at jcrew.com and bloomingdales.com.

Workers arriving back at their desks after the long Thanksgiving weekend created the Cyber Monday moniker by using their company desktop PCs to shop online.

Though it's a big day, daily online sales peak closer to Christmas.

"Cyber Monday is definitely not the biggest day," said Sucharita Mulpuru, an analyst for Forrester Research. "It will be the biggest online shopping day to date, but it will be smaller than some of the days we will see in the weeks to come."

The bright reports of Monday, however, can't hide the Grinch factors in play this season.

Lowered Forecasts

U.S. online sales Nov. 1-28 fell 4% from the year-earlier period to $10.4 billion, market tracker comScore Networks reported Sunday.

In October, Forrester cut its forecast for online holiday shopping in the U.S. to a 12% growth rate from its previous forecast of 18%. It said last year's growth rate was 21%.

Consumer spending by individuals slipped by 1% in October, said a government report last week.

But there have been glimmers of a silver lining. Consumer online spending on Black Friday, the day after Thanksgiving and the traditional start of the holiday shopping season, rose 1% from a year ago, comScore says. A year ago, Black Friday notched a 6% gain, it says.

But eBay's (EBAY) PayPal consumer online payment service said its volume rose 26% on Black Friday over the same day a year ago.

More consumers seem to be reaching for the Web's leading payment service to avoid using their credit cards, Mulpuru says.

"If anybody is concerned about spending money on credit, PayPal and other alternative payment methods provide a really strong option to complete your transaction without having to be bogged down with credit issues," she said.

For 25 merchants that use Chase Paymentech to process their online payments from consumers, the news was also good.

Online sales for those retailers on Sunday topped $124.2 million, up from $91.4 million on the Sunday after Thanksgiving a year ago, according to the company.

Cyber cash registers also are ringing in other parts of the Web.

Mercent, an online services company, says sales for its more than 70 online shopping sites rose 25.6% for the seven days ended Sunday vs. the corresponding period a year ago.

Later Thanksgiving

But there is a wrinkle. Thanksgiving last year fell on Nov. 22, compared with Nov. 27 this year.

"So that's six shopping days that followed Thanksgiving Day that we lose this year," said Eric Best, chief executive of Mercent, which processes orders for online retailers. "That's not going to account for an entire slowdown in growth, but it certainly contributes."

In examining 29 of its online retail customers, Mercent found that 20 of them boosted revenue for the week ended Sunday vs. the year-earlier period. But nine saw declines.

The economy played a role for those sellers with lower revenue, but so did product selection and level of advertising, Best says. "Also, more mature retailers are obviously going to have less growth potential," he said.

Many online retailers are feeling the direct pinch of the economy.

HobbyTron.com, a seller of radio-controlled toys and other hobby-related gifts online, has had problems, says company founder Tim Gibson.

"We are seeing about as much traffic as last year, but not as many people are buying," he said.

It's cut prices and is relying more on partner sites to help push its products to online consumers.

Another challenge is inventory, Gibson says.

"With the downturn, our suppliers are providing less inventory," he said. "So, inventory availability is part of the problem for us."