Online Sales Hit 7-Year Low: Survey

By Alan Wolf -- TWICE, 12/1/2008

RESTON, VA. — Online spending grew by only 1 percent in October, according to surveys by market research firm ComScore, representing the lowest monthly growth rate since the firm began tracking e-tail sales in 2001.

October was the sixth consecutive monthly decline, following a high of 28 percent in August 2007. E-commerce growth rates increased just 4 percent between August and October 2008.

ComScore said the slowdown was driven by cutbacks among low- to middle-income households, while online spending by upper income segments remained robust.

Specifically, online expenditures fell 3 percent during the August through October period among households making less than $50,000, while e-tail spending by households with incomes of between $50,000 and $100,000 showed an increase of 1 percent.

In comparison, households making $100,000 or more increased their spending by 14 percent during the three-month period.

Middle income households account for the largest share of total e-tail dollars at 45 percent, followed by upper income households (35 percent) and lower income households (21 percent), ComScore said.

"It's clear that worry, concern and even fear are the prevailing consumer sentiments at the moment, and this is causing all income segments to pull back their spending," said ComScore chairman Gian Fulgoni, with the sharp drop in oil prices offering "the only near-term ray of hope."

Despite the pullback, The Conference Board projects that 39 percent of all consumers will buy holiday gifts online this year, based on a survey of 5,000 households. But the not-for-profit forecaster said spending across all channels will fall more than 11 percent this season to an average of $418 per household.

Lynne Franco, director of the group's consumer research center, said the holiday season "is shaping up to be one of the most challenging … in years and it's going to take more than the usual discounts and incentives from retailers to get consumers to spend more freely."