GENERAL
NEWS

BY PETE BARLAS AND DOUG TSURUOKA

INVESTOR'S BUSINESS DAILY

Posted 12/23/2008

The economic Grinch and compressed holiday shopping season have conspired to produce the first decline in U.S. online retail sales, despite a late surge.

U.S. online sales from Nov. 1 to Dec. 21 fell 1% from the year-earlier period to $24.7 billion, market tracker comScore said Tuesday.

A year ago, sales for the same period rose 13% to $24.96 billion from $22.04 billion in 2006.

Considering the economy and late start, the numbers could have been much worse, says Eric Best, chief executive of Mercent, a company that helps companies sell goods online. Thanksgiving was Nov. 27 this year and Nov. 22 last year. The traditional buying season starts the day after.

"It's phenomenal given there were fewer shopping days after Thanksgiving this year," Best said.

ComScore says a late surge helped. Sales Saturday and Sunday jumped 98% vs. sales on the final weekend before Christmas last year. But those dates last year were Dec. 22-23, close to the holiday for items being shipped.

The late jump might've been boosted by poor weather. The tale of the figures "suggests that many consumers opted for the cozier confines of online shopping rather than having to brave the severe cold and snowstorms affecting much of the northern half of the country," comScore Chairman Gian Fulgoni said in a written statement.

Mercent says online sales for 28 clients — including Amazon (AMZN) and eBay (EBAY) — rose 29.6% for the first 20 days of December vs. the year-ago period.

Mercent helps clients boost sales by linking their Web sites to comparison shopping sites.

"In this economy, consumers are doing more bargain hunting, and the first place they are going to go is comparison shopping engines and online market places like Amazon and eBay where they can get the best deals," Best said.

But since Thanksgiving, eBay shares are up just a fraction. Its guidance in October called for a slight decline in revenue this quarter vs. a year ago, and per-share profit ex items of 39-41 cents vs. 45 cents a year ago. Some observers are worried because eBay hasn't updated its guidance, says Standard & Poor's equity analyst Scott Kessler.

EBay's guidance "implied no Christmas this year," he said. "There are a lot of reasons to think this is a very, very tough quarter for eBay. It's just a matter of how well eBay has been able to weather this economic tsunami."

Since Thanksgiving, Amazon's shares are up 13%. It outperformed most of the e-commerce sector last quarter, and its Kindle e-book reader has been a hit.

Bargain hunters have boosted uBid.com, an auction site that sells overstocked inventory. For the month through Monday, its sales are up 37% from the year-ago period, says Jeffrey Hoffman, CEO of uBid owner Enable Holdings.

Hoffman says the economy has prodded more buyers to look for deals and prompted manufacturers and retailers to unload products they can't sell in other channels. "We're getting more business on both sides," he said. "The downturn is a benefit to us."

Deep discounts have become commonplace. Some e-tailers such as SmartBargains.com have offered discounts of as much as 40% to 70% on high-end jewelry, handbags and shoes to spur sales. Analysts say the late surge could be the result of deep discounts.

But discounts cut profit margins. "The margins are going to show that it wasn't such a hot retail season," Hoffman said.

 
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