Despite Hot Deals, Cyber Monday Sales Tepid

Cyber Monday is the biggest online shopping day of the year, but online retail experts say it may not be big enough this year to increase overall holiday sales compared to 2007.

The November-December holiday shopping season will generate US$29.2 billion in sales this year, the exact same figure as in 2007, according to comScore.

In October, Forrester Research predicted year-over-year holiday Web sales would grow by as much as 12 percent. However, that figure could move down to 7 percent or 8 percent once all the data is in, the firm acknowledged Monday.

Still, that’s not stopping retailers from offering huge savings on popular items such as iPods, MP3 players, video games and digital cameras — as well as free shipping.

Nearly 84 percent of retailers planned a special promotion for Cyber Monday, up from 72.2 percent in 2007, according to the eHoliday survey conducted by Shopzilla.org this fall.

Nearly 25 percent of retailers surveyed indicated they would offer one-day sales, and nearly 23 percent planned to offer free shipping on all purchases.

Electronics Lead the Way

Consumer electronics were the leading sellers at Seattle-based e-commerce giant Amazon.com by the middle of Cyber Monday.

“Electronics have been big,” Sally Fouts, an Amazon.com spokesperson, told the E-Commerce Times. “We’ve had some great deals, and people have responded really well.”

The top five selling items at Amazon: No.1 — the Kindle, Amazon.com’s wireless reading device; Nos. 2 and 3 — two different GPS devices; No. 4 — a Sony Blu-Ray player; and No. 5 — Apple’s 8-gigabyte iPod music player.

Amazon.com offered shoppers significant savings on several items: 20 percent to 50 percent off on Creative’s Zen 4-gigabyte MP3 player; 53 percent off Microsoft Home and Student Office software; and 45 percent off the Samsung 2233BW 22-inch LCD monitor.

While Black Friday and Cyber Monday are important components of Amazon.com’s holiday shopping season, the company actually started offering deals early last week, Fouts said.

Several other e-commerce bellwethers had special promotions and deals on Cyber Monday, including online auctioneer eBay, Best Buy, Nordstrom and Eddie Bauer.

Best Buy offered free shipping on laptops that cost $699 or more and desktops that cost $499 or more, as well as a $366 savings on the Canon 2762B003 Digital Rebel XS SLR camera.

Nordstrom offered free shipping on all online orders worth $100 or more, and Eddie Bauer offered free shipping on all items, with no minimum, for two days only. The company, in business since 1920, also offered 40 percent off on all men’s and women’s outerwear.

Consumers Tighten Wallets

Despite the vast array of special promotions and deals on Monday, consumers apparently are not spending as much as they were last year.

In a statement Monday, the National Bureau of Economic Research said the United States officially entered a recession in December 2007. The fall in the housing market, massive layoffs across all sectors of the economy, and much higher interest rates on credit cards have all conspired to dampen the holiday shopping spirit.

“There’s a strong correlation between housing prices, home equity and consumer spending,” Richard Hastings, a consumer strategist at Global Hunter Securities, told the E-Commerce Times. “That’s well established.”

One million jobs will be lost during the Nov.-Jan. 2008 holiday season, Global Hunter Securities predicts. That would be the highest number since 1974, when 1.3 million jobs were lost during the same three-month period.

“This is a big problem,” Hastings said. “When you have large numbers of layoffs during the holiday season, you see a big contraction in consumer spending.”

High Interest Rates

At the same time that the overall economy has contracted and millions have lost their jobs, credit card companies have also raised interest rates.

“We’re definitely aware that the slow rate of spending on credit cards online is because they are more restrictive than they were in the past,” Hastings said. “It’s getting worse gradually, and people are getting really careful about carrying a balance.”

Hastings cautioned consumers not to miss payments on existing balances.

“If you carry a balance and miss a payment past 30 days, you’re going to get clobbered with an even higher interest rate,” he said.

The high interest rates on credit cards have pushed consumers to find alternative methods for completing online purchases. One beneficiary has been online payment service PayPal, which is owned by eBay.

“You can link [your PayPal account] to your checking account, so you can avoid carrying a credit card balance,” Sucharita Mulpuru, an analyst at Forrester Research, told the E-Commerce Times.

Transactions on the PayPal service rose 34 percent and showed a 26 percent increase in online payment volume on Black Friday, PayPal reported, as shoppers cashed in on exclusive discounts and promotions from some of the largest merchants online, including Buy.com.

“As eBay has expanded, more and more people became aware of and adopted PayPal,” Global Hunter’s Hastings said. “PayPal has become a more flexible solution at a time when credit cards are more restrictive, and it’s got a great purveyor in eBay. It’s been very, very successful in the last year.”

Light at End of the Tunnel?

There may be a silver lining in Monday’s official confirmation that the American economy has been in a recession since December 2007, suggested Forrester’s Mulpuru.

“Usually, when they declare a recession, it’s the bottom of the stock market,” she said. “So, in one way, it is actually a bit of a relief. People have been talking about a recession for a year now. It may mean we can see a light at the end of the tunnel because, hopefully, we know where the bottom is.”

As for Forrester’s October prediction of 12 percent growth in Web sales during the November and December holiday season, Mulpuru acknowledged the figure may be too high.

“We’ll know more in the next few weeks,” she said. “It depends on how strong December is.”