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Thursday, January 3, 2013

Congress Pours Coal Over An Otherwise Merry Christmas Season for Online Retailers

Retail e-commerce spending for the 2012 holiday season grew by 14 percent, year-over-year, to $42.3 billion, according to comScore, which measures digital data. However, the Reston, Va.-based firm said sales growth did not meet expectations and blamed the ‘fiscal cliff’ debate for causing consumers to be cautious spenders during the latter half of the season.

For the third year in a row, CyberMonday, the Monday after Thanksgiving Day (Nov. 26 this year), was the heaviest online holiday spending day at $1.46 billion. The latter portion of the season saw several days with particularly strong growth, according to comScore, including Free Shipping Day (Dec. 17), up 76 percent to $1.01 billion and Christmas Day, up 36 percent to $288 million.

However, these performances on individual days could not make up for the spending growth shortfall earlier in December, the Reston,Va.-based firm said. The holiday season started off well but a December swoon in consumer confidence gave way to softer than expected buying during the critical shopping weeks in early to mid-December. Gian Fulgoni, comScore chairman, said the company expected a growth rate of 16 percent and total sales to be at $43.4 billion, more than a billion dollars greater than the final tally.

“This year’s growth rate is essentially on a par with last year’s,” Fulgoni said. “Consumers almost immediately pulled back on spending, apparently due to concerns over the looming ‘fiscal cliff’ and what that might mean for their household budgets in 2013. With Congress deadlocked throughout December, growth rates softened even further and never quite made up enough ground to reach our original expectation.”

The firm defines the holiday season as November and December (nine weeks this year). Looking at the totals on a weekly basis, it shows that sales growth in November ranged from 15 to 17 percent, year-over-year. Sales growth then fell to 11 percent for the week following Thanksgiving and dropped to 1 percent during the last week of the season, with one major exception. The week that ended just before Christmas Day (week eight) saw a 53 percent increase in sales. ComScore said that the highly variable growth rates in the final two weeks (extremely high in the penultimate week and extremely low in the final week) are primarily a function of the way the calendar fell in relation to Christmas.

“While it is typical to see growth rates subside slightly during the week after Thanksgiving, the amplified and sustained lull this year came as something of a surprise,” Fulgoni said. “You might say that had it not been for Congress, every other indicator suggested it would have been an even merrier Christmas for online retailers.”

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