E-Commerce Craters in November

First Year-to-Year Decline Hits Sector; Retailers Prep Online Incentives

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NEW YORK (AdAge.com) -- Forget the notion that high gas prices and free shipping will be a boon for web retailers. ComScore found consumer web spending dropped 4% so far in November versus the same period last year -- the first time e-commerce figures have shown a year-to-year drop.

Consumers spent an estimated $8.19 billion online over the first 23 days of the month, compared to $8.51 billion a year ago.

"Despite the recent reprieve that plummeting gas prices have given American consumers, the depressed and volatile stock market, declining housing prices, inflation and the weak job market all represent dark clouds hanging over their heads this holiday shopping season," said comScore chairman Gian Fulgoni.

The new numbers reflect a pretty drastic reversal in online consumer spending from earlier in the year. During the first 10 months of 2008, e-commerce sales were $102.1 billion, a 9% increase from the $93.6 billion spent in 2007.

ComScore is predicting that spending will come later, and that holiday e-commerce sales will ultimately match the $29.2 billion spent during November and December of last year.

Hope for 'Cyber Monday'
Online retailers are planning a promotional blitz to recoup some lost sales on the so-called "Cyber Monday," the Monday after Thanksgiving, when consumers return to work, boot up their computers, and presumably start to think of all the shopping they have to get done.

In a holiday survey conducted this fall by Shopzilla, 83.7% of retailers will have a special promotion for Cyber Monday, up from 72.2% last year. The most popular tactics? Specific deals (38.8%), e-mail campaigns (32.7%) and one-day sales (24.5%). Additionally, almost a quarter of retailers are offering free shipping.

In addition, search technology firm SearchIgnite found retailers' spend on search marketing is up 33% this year. Of course, it notes, much of those dollars are coming from other parts of the marketing mix; they're not new dollars, in other words. It also notes that conversion rates (the rate at which a searcher actually clicks through and buys a product) have held steady, but consumers are spending less per purchase.

This means that retailers are making less revenue from their search expenditures and their search return on investment is actually dropping.
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