Growth Slows For Online Holiday Spending - InformationWeek

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Growth Slows For Online Holiday Spending

Spending growth for the first part of the holiday season was 18.4%, down from 26% a year ago, ComScore said.

Online holiday spending is failing to meet expectations, as the economy takes its toll on consumers' gift budgets, a research firm said Monday.

From Nov. 1 to Dec. 14, spending was 18.4% more than the same period a year ago, which was substantially less than the 26% growth during the six-week period in 2006 over 2005, ComScore said. The researcher defines the holiday shopping season as the months of November and December.

Spending this holiday season could fail to reach ComScore's forecast of a 20% increase over last year. "It's going to be dependent on the beginning of this week," ComScore analyst Andrew Lipsman told InformationWeek.

If spending is very strong, then online revenue could reach ComScore's prediction. Working in retailers' favor is the fact that consumers held back spending in the beginning of the season, which means there could be some pent-up demand, Lipsman said. Also, there's still time in the beginning of the week for consumers to make purchases and get free standard shipping from retailers.

Nevertheless, shoppers are not expected to match the 26% increase in spending reported for the 2006 holiday season over 2005.

The Grinch of the holiday season this year is the economy. "There clearly are some economic issues weighing on some consumers this year in both online and offline sales," Lipsman said. Those issues include the subprime housing meltdown, the decline in home values, higher gas prices, and an uncertain stock market.

An indicator that those conditions are at fault is the wide discrepancy of spending between income groups. As of Dec. 11, low- and middle-income households, which are the first to feel the pinch in a slowing economy, are spending 10% and 17% more than a year ago, respectively, according to ComScore. Households with annual incomes of more than $100,000, on the other hand, are spending 28% more.

While higher-income households normally spend more than lower-income groups, the difference isn't usually so great, unless there's a problem with the economy, Lipsman said.

In terms of dollars, consumers spent $22.67 billion between Nov. 1 and Dec. 14, compared with $19.15 billion in the same period last year, ComScore said. From January through October, consumers spent $93.6 billion online, which is 21% more than the $77.5 billion in 2006.

Overall U.S. spending, online and offline, is expected to increase just 4% this year to $474.5 billion, which is the slowest growth rate since 2002, when sales rose 1.3%, according to the National Retail Federation. This year's spending is also expected to fall below the 10-year average of 4.8%.

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