Ecommerce loses immunity to economy woes: Eric Auchard

-- Eric Auchard is a Reuters columnist. The opinions expressed are his own --

By Eric Auchard

LONDON (Reuters) - For years, Web retailers have touted their convenience and efficiency over conventional retailers, and enjoyed surging double-digit sales growth, especially in the crucial year-end holiday shopping season.

But the steady draining of consumer confidence reflected in recent government data and the latest market research reports suggest the online retail industry is bracing for a humbling first-ever year of flat or even contracting holiday sales.

Ecommerce, for reasons tied to both the global economic crash and Web-specific factors, is poised to fall harder than the much maligned retail store industry, itself struggling with recent high-profile bankruptcies and widespread signs that consumers are looking to sharply curtail their spending.

"Retail spending has not really dropped," says Gian Fulgoni, chairman of consumer audience measurement firm comScore Inc. "It's ecommerce growth rates that have fallen off a cliff."

This week, comScore once again cut its forecast for U.S. holiday shopping, reporting that sales in the first 23 days of November had fallen to $8.2 billion, down 4 percent from a year earlier.

Forecasts for online holiday shopping issued in October or early November took the "glass half full" view of the coming shopping season -- predicting low double-digit growth. That would be below prior years, but healthy versus overall retail.

The declining outlook comes after third-quarter U.S. Department of Commerce data showed dismal October growth online. Forecasters who had clung to the notion that online retailers would prove an exception, have changed their tune recently.

Nonetheless, the consumer tracking firm predicted online holiday sales for November and December could end flat at around $29.2 billion, in terms of year-over-year growth, but only if there is no further decline in the economy in coming weeks.

Until recently, comScore had forecast 6 percent growth in U.S. holiday sales, Fulgoni said. Similarly this week, eMarketer cut its 2008 ecommerce forecast to 4 percent from 10.1 percent.

Flat growth this season would compare with a 19 percent rise in 2007 sales, 24 percent in 2006 and 26 percent in 2005.

Overall, the National Retail Federation forecasts total U.S. holiday sales to grow a tepid, but positive, 2.2 percent to $470 billion. The includes both classic stores and Web storefronts.

In statistical terms, online retailers just had farther to fall than their distressed store-based rivals.

Similarly, in Britain, the exception that once applied to ecommerce is losing steam fast. Visits to UK shopping sites this month have declined by 14 percent as of November 24, according to data from online market research firm Hitwise. Declining traffic has come despite heavy Web discounting activity at big retailers such as HMV Waterstones and Tesco.

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