The Growing Online Contribution to Overall Retail Sales
Biz Weak’s March 5 issue has this tidbit (appears to be free for now) relating to online sales, which has ever-increasing relevance to what you hear about retail sales in the physical world:
When it comes to analyses of consumer spending, online sales are often overlooked. But retail e-commerce sales growth far outpaces that of overall consumer spending and shows no sign of letting up. That means online sales will only grow in importance when it comes to gauging the health of consumer spending.
Fourth-quarter retail e-commerce sales surged 24.6% from the previous year, according to the U.S. Census Dept. That rapid growth is a reason why fourth- quarter non-auto and non-gasoline retail sales looked much better than the widely followed chain-store sales figures.
As more consumers buy online, e-commerce sales account for a larger chunk of overall retail spending. Sales of $108 billion in 2006 topped those at electronics and appliance stores. And in the final quarter of 2006, online shopping accounted for 3% of total retail sales, nearly double the share at the end of 2002.
Retailers do NOT routinely report their online sales in their monthly reports, typically expressing results as “same-store sales compared to a year ago.” This means that the TOTAL strength of the retail sector is consistently being underreported.
This chart shows that if online sales continue to grow at a 20% rate during the coming year, you should mentally add about a half of a percentage point to reported retail sales (the difference between the combined 4.48% and the reported 4% shown in the example) to approximate what’s really happening overall:
An alert business press should start looking harder at the impact of the continued growth in e-commerce on the overall retail results — especially in evaluating whether or not the retail sector in total is giving a boost to the economy or dragging it down. Will they?
