In chart after chart, the numbers kept falling off a cliff. In delivering ComScore's "State of the U.S. Online Retail Economy through January 2009" report today, Chairman Gian Fulgoni didn't mince words. His references kept returning to the fact that the numbers have never looked this bad.
But ecommerce could be worse. A lot worse. It could look like traditional retail.
ComScore's panel (rather than survey) data indicate a drop in year-over-year online shopping in the critical fourth quarter of 2008, "The first time we have seen a decline in the eight years that we have been tracking quarterly," noted Fulgoni grimly. Any bumps in spending he attributes to an increase in gift card redemption - rather than actual buying - over the holiday season.
Spending drops were greatest more or less where you'd expect. Luxury goods were hit hard, as was entertainment spending. But there was also a steep 30 percent decline in spending in sectors such as office supplies as businesses cut back their budgets.
So what's the good news? "The internet is growing in importance as a sales channel, but also as a channel for research and the decision making process," Fulgoni said.
Citing a cocooning behavior trend, unsurprising in an era of plunging consumer confidence, consumers are staying home more -- and surfing the web a whole lot more. Going online is the top activity consumers are employing to deal with stress; 52 percent of them are spending more time online, vs. watching TV, which clocks in at 50 percent. "Video games an opportunity channel as people spend more time online," Fulgoni pointed out.
As they spend more time online, the channel's importance in their lives and buying patters increases. Sixty-five percent cite the web as "important" or very important in making buying decisions, up an impressive 50 percent over the past year.
They're also relying on the web to save money. Fulgoni: "we are dealing with a much, much, much more informed shopper. Pricing power has moved from the retailer to the consumer." But this, too is not without opportunities. Shoppers are turning to coupons with a vengeance, which can create very real and cost-effective opportunites for retails, particularly those who can tie together on- and offline channels, such as tying online spending into offline loyalty program, all the while bypassing the need to distribute coupons the old-fashioned way; in magazines and circulars.
Another ray of sunshine? OK, ecommerce spending was up in January a scant 2 percent. May not sound like much, but it's better than the continued downward trend in the offline retail sector.
Accordingly, ComScore is reommending an aggressive move of marketing dollars to online channels. "Online is a much more cost-effective medium, with offline sales impact," said Fulgoni, "You can get pretty dramatic gains by shifting to the online channel. You'll get double the bang for your buck."
And that shift should be to search and other pary-per-performance ad models. Display advertising, he noted, is seeing click rates as low as 0.1 percent - (more) bad news for publishers, but good news for advertisers who can get more and/or better performing media for their money.
For a very detailed look at current ecommerce economic trends by retail sector, demographics, and spending, most of the charts from ComScore's report are posted on our Flickr stream - in larger, more legible sizes than on this post!