It's going to be another bitter holiday season for retailers as shoppers continue to tightly hold on their purse strings. That said, one area of retailing is expected to see an improvement over last year; e-commerce sales.
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Growing Importance
While Black Friday is still a vital day for retail sales, Cyber Monday is greatly growing in importance. A look at the growing number of retailers getting into the Cyber Monday action demonstrates the importance retailers are placing on online sales. This year, the National Retail Federation (NRF) reports that 87% of retailers will run a special promotion for Cyber Monday. In 2008, less than 84% of retailers ran promotions and in 2007, just 72% participated. In addition, this year, Cyber Monday won't consist of just one day. Walmart (NYSE: WMT), Target (NYSE: TGT) and JC Penny (NYSE: JCP) will be running special promotions for several days.
Low Prices and Convenience
With consumers viewing price as the most important aspect of their holiday shopping, the convenience of online price comparison should help e-commerce sites outperform brick-and-mortar stores.
Analysts at comscore.com expect online revenue to rise 3% to $28.8 billion in November and December combined. On the other hand, the NRF is anticipating a 1% drop in holiday sales at retail stores.
According to the NPD, 61% of shoppers are doing online research before making a purchase. Given that e-commerce sites are known for their rock bottom deals, consumers may be more likely to make their purchases with a click of a button. In addition to attractive markdowns, many online retailers are offering free shipping, allowing consumers to avoid the rush of shoppers and long lines in stores - without paying a premium for the convenience.
E-Commerce Companies
Of course the traditional e-commerce outlets like Amazon (Nasdaq: AMZN) and eBay (Nasdaq: EBAY) first come to mind when thinking of companies that will benefit from the online holiday shopping trend this year. However, retailers who excel at e-commerce will benefit as well. Both JCrew (NYSE: JCG) and Ralph Lauren (NYSE: RL) have superior e-commerce operations as well as mobile friendly web-browsing abilities - a growing online shopping trend.
Bottom Line
I'm far from optimistic about holiday sales this year. In fact, I predict that estimates are overly rosy and believe that the market will be let down come January when results are released. That said, I do agree that online sales will be a bright spot during this gloomy shopping season and that e-commerce sites will be the ones to win over holiday dollars.
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