E-Commerce Forges Ahead in a Turbulent Holiday Spending Environment

While many brick-and-mortar retailers were disappointed with sales for the 2012 holiday season, online merchants posted respectable gains in the mid-teens, according to new reports.

Internet usage tracker comScore Inc. reported on Thursday that e-commerce volume hit $42.3 billion in the November-December holiday shopping season, up 13.8% over $37.2 billion for the 2011 season. And JPMorgan Chase & Co.’s merchant-acquiring subsidiary, Chase Paymentech, says its Chase Holiday Pulse tracking service showed a 15.2% increase in dollar volume from Oct. 29 to Dec. 25 versus a year earlier. Holiday Pulse tracks dollar volume and transactions from 50 leading merchants in Chase Paymentech’s massive e-commerce portfolio but doesn’t disclose actual dollar volume or transaction numbers.

Mia Shernoff, executive vice president of marketing at Dallas-based Chase Paymentech, says that while the overall growth was strong, the increase in dollar volume likely would have been even higher had it not been for merchant discounting and a growing tendency for consumers to shop online for lower-ticket goods. “This kind of seemed to be somewhat of a cooling-off period compared with some of the explosive growth we’ve seen in the past,” Shernoff tells Digital Transactions News.

In fact, the Holiday Pulse merchants posted a collective increase in transactions of 24.3%, but with dollars spent up just over 15%, their average ticket declined 7.3% year-over-year. Shernoff attributes the lower tickets in part to more shopping for low-cost digital goods such as games, but merchant discounting and continued demand for free shipping played a major role too. Many e-commerce merchants extended price promotions beyond traditional sales days, according to Chase Paymentech.

Yet another factor that held spending growth in check in 2012 was what Shernoff calls “educated consumer activity” in which consumers carefully compared prices online. The ultimate form of this trend, one which hits physical merchants hard, is “show-rooming” in which consumers using smart phones go into a store and compare prices with those for similar or identical products being sold online. If the store can’t beat the price, the prospective customer leaves.

On the plus side, Shernoff says retailers are starting to figure out how to combine their physical and online sales efforts for maximum effect. “I think our merchants are getting more savvy in using social media as well as this convergence of online-offline,” she says.

Dollar volume spent on consumer electronics grew 18% among Chase’s Holiday Pulse merchants while apparel spending grew only 2%, according to Shernoff.

Reston, Va.-based comScore said the holiday online spending season started off strong, but “a December swoon in consumer confidence gave way to softer than expected buying during the critical shopping weeks in early to mid-December, from which growth rates never fully recovered.” Some of the pullback apparently resulted from consumers’ fears about how the federal government’s looming “fiscal cliff” might affect their budgets, according to comScore.

Overall retail sales rose 4.8% in December over a year earlier, according to Retail Metrics Inc. data cited by USA Today. The newspaper said the increase was better than expected given the fiscal-cliff uncertainty and the lingering financial hit to many consumers in the Northeast affected by Hurricane Sandy.