U.S. E-Commerce Sputters During Q3

November 3, 2008 Updated: November 3, 2008

Once the fastest-growing segment of U.S. consumer spending, online sales have slowed considerably during the third quarter of 2008, a new study showed.

ComScore, a leading online marketing research firm, recently released its “Q3 2008 Retail E-Commerce Report.” The report showed that online spending grew an anemic 6 percent during the third quarter of 2008, compared with a 12 percent increase during the same period last year.

Total U.S. e-commerce excluding travel were approximately $30 billion in the third quarter, comScore said.

In addition to sagging online sales, the survey also suggests that consumers are increasingly worried about the nation’s economy and their financial future. Only about a quarter of those surveyed believed that the U.S. economy would be “better” a year from today.

The recent stock market drop has dampened consumer sentiment considerably, a leading indicator of future economic conditions. Weak consumer spending has also dragged down oil prices, as the latest data estimated that average U.S. gasoline prices fell to $2.45 last week.

“Consumers’ economic pressures continue to have a significant impact on retail spending, which is evident in the slowing growth rates in the online channel,” comScore Chairman Gian Fulgoni said in a statement.

Outpacing Store Sales

Despite the third quarter results, online sales still outpaced store retail sales during the last several months. Fulgoni expects that trend to continue.

“Online marketing campaigns have been proven to not only grow a retailer’s e-commerce sales but to also have the ability to drive increased traffic into retail stores,” Fulgoni said. “And, with so many consumers expected to be especially cost-conscious this holiday season, it is important for retailers to reach them at the initial point of the purchase funnel—when many product research and price comparisons are being conducted online.”

Some analysts expect a price war between online retailers this Holiday shopping season, and the largest retailers may win out as consumers shun smaller boutique shops with higher markups.

Amazon.com, the world’s biggest online retailer, has high hopes this winter.

Brian McBride, U.K. managing director of Amazon, told The Sunday Times, “Growth is slower but we are still expecting our biggest Christmas ever. In our view it is still growth, growth, growth.”

Electronics Reign

Consumer electronics and gadgets are expected to remain the hottest commodities this Holiday shopping season. More consumers may log onto the Internet in search of better deals.

A recent research report released by the Consumer Electronics Association (CEA) showed that electronics comprise four of the top ten Holiday gift items for U.S. adults. Computers, televisions, video game systems, and mobile phones were all among the top ten.

“Certainly with the recession in the early 1990s and the burst of the dot-com bubble, consumers spent less of their discretionary income on consumer electronics,” said Shawn DuBravac, CEA economist in a statement.

“However, there has been a change in sentiment as consumers now view CE as a necessity rather than a luxury. Although this year’s projected fourth quarter growth is down from last year, discretionary spending on consumer electronics is at an all-time high,” he said.

The CEA expects consumer electronics shipments to increase by 3.5 percent in the fourth-quarter compared to 2007.