According to comScore, a marketing research company, for the first time since they began tracking the performance of online sales in 2001, the US online holiday sales dropped in November 1 to December 23 period of 2008 by over 3 percent. However, based on unofficial data the brick and mortar (B&M) retailers have performed worse than online competitors by shaving off sales close to 10 percent.
The major factors contributed to the decline are consumers’ reduction in spending particularly due to recession, growing unemployment woes and tightened credit conditions. Some B&M retailers have gone on record claiming that despite huge discounts there were not any takers for many products. Women’s apparel, electronic appliances, white goods and luxury items showed sharp decline in demand.
Drastic slump in sales earlier in the year already led to bankruptcy filings from Circuit City Stores while Linens N’ Things was forced to liquidate. The slide in retail holiday sales may force other large retailer chains to follow suit in 2009. Holiday sales usually account for 30 to 50 percent of a retailer’s annual revenue. The exact figures of the decline in sales are likely to emerge in the second week of this month as the companies will report their sales figures on January 8.
Though profit margins have come down for both businesses, e-tailers are likely to lose marginally on holiday profits as compared to B&M retailers. Online retailers often do not pile up their stocks, and this allows them to keep strict vigil on their profits. On the contrary, B&M stores have to be wary of their frozen inventory and had to cut down the prices time to time to minimize losses. E-commerce retailers feel that the vacuum in the market that would be created by the exit of many traditional retailers is likely to help them in 2009 to make a comeback with a double digit growth which they enjoyed since 2001 barring this year.