Will the Real E-Commerce Holiday Forecast Please Stand Up?

‘Tis the season for online shopping forecasts, and with each passing day, itseems like there are new holiday predictions to digest like so much turkey and cranberry sauce.

How can e-tailers rely on these numbers when every research firm has arrived ata different figure for the projected sales?

“I would focus less on the absolute numbers and more on the growth,” JupiterMedia Metrix analyst Ken Cassar told the E-Commerce Times. “What youtypically find is some firms define the holiday season differently (timeperiod, geography, etc.). Because it’s so difficult to align those factors,its best to focus on the growth rates they represent.”

A survey of this season’s forecasts reveals that most of the majorresearch firms are actually fairly close in their holiday predictions, butwith some important distinctions.

Naughty or Nice?

So far, Gartner, Jupiter and Forrester Research have arrived with thehighest holiday sales projections for e-commerce, at US$11.86 billion, $11.9 billion,and $11 billion respectively.

Predictions by Nielsen//NetRatings and The Yankee Group came in lower, at $10 billion and $9.5 billion.

All of the firms determined that there will be respectable growth for e-commerce this holiday season — with more shoppers spending more dollars than ever before — though signs indicate the end of the triple-digit expansion the industry enjoyed for several years.

When looking at the predicted growth rates, however, there are huge differences among the analysts’ numbers, with year-over-year growth rates ranging anywhere from 7 to 40 percent.

Play It Sage

“Whenever you’re forecasting, the one thing you can be sure of is you’re notgoing to be exactly right,” Cassar said. “We’d rather be a little bit lowthan a little bit high.”

According to Cassar, Amazon.com’s recent 13 percent quarterly drop in the books/music/video category a portent of things to come.

For its part, Yankee increased its forecast for the percentage of totalretail sales that will be transacted online from 1.2 to 1.3 percent.

“While there may be more spending online compared to last year, the moresignificant factor at work is the decrease in total retail spending webelieve we’ll see,” Yankee analyst Paul Ritter told the E-Commerce Times.”The major driver is the impact of macroeconomic conditions.”

It’s the Economy

These conditions include increased layoffs, expected reductions in totalconsumer spending (as well as low consumer confidence levels), and lessdiscretionary income.

However, both Ritter and Cassar agree the affects of theSeptember 11th terrorist attacks on e-tail spending will probably be negligible.

“We’ve speculated that the net impact is zero,” Cassar said. “The negativeeconomic impact of the attacks will be offset by the increased likelihoodthat consumers will shift some of their dollars to the Web.”

In a consumer survey conducted by Jupiter several weeks after the attacks,45 percent of consumer respondents stated they would avoid shopping at mallsbecause of the crowds, nearly identical to last year’s response of 44percent, when there was no terrorist threat at issue.

Real World Rules

The positive forecasts for online holiday sales appear to be accurate when compared to the holiday predictions for offline sales.

The most recent report from the National Retail Federation (NRF), predicted holiday sales for November and December will increase about 2.5 to 3 percent.

Four out of five consumers in the NRF report said they plan to buygifts and cards this holiday season for about the same number or more peoplethan last year, spending an average of $940.

Everything’s Connected

The news that e-commerce will be heavily impacted by the larger economicslump seems to fly in the face of what analysts have been telling us for thepast several years: that because e-commerce is such a small portion of theoverall economic picture, it is virtually immune to a larger economicrecession.

That tune has now changed.

“To a large extent [e-commerce] was immune because its growth rates were so fast,”Cassar said. “However, now as its rates come down to earth, what’s going onwith the economy as a whole has a substantial impact.”

That is not necessarily a bad thing, Cassar said.

“I think that a slow growth holiday season may be the best thing that canhappen for online retailers,” Cassar said. “In the past they’ve had to rampup so aggressively every year for the holidays and overspent. There will beless of that this year. The benefit is that it increases the likelihood thata particular e-tailer will be able to balance its own need for profitabilitywith consumer expectations.”