Though online powerhouse Amazon.com pulled in extra cash this year, overall retail sales on electronics, women’s clothing and jewelry plummeted more than 20 percent from last holiday season. Even online payday loans couldn’t coax consumers into spending at the levels they did last year.
- Electronics retailer Circuit City sought bankruptcy protection this year.
That figure is based on Standard & Poor’s 500 Retailing Index. Interestingly, the index does not include Wal-Mart.
First, the good news
Amazon.com reported its best-ever holiday season this year. Amazon is the world’s largest Internet retailer. Its stock rose nearly 5 percent on Nasdaq. Overall sales among online retailers dropped along with holiday sales nationwide, but Amazon reported selling more than 6.3 million items on its peak day, Dec. 15.
Market analysts attribute Amazon’s success to its variety of products and user-friendly format. Amazon has built a reputation as a one-stop online shop, offering everything from bubble bath to power tools. Plus, for cash-conscious customers, it sells use items at deep discounts.
Online payday loans are another example of consumers using the Internet instead of going to a store.
Now for the bad news
For most other retailers, things were more bleak. Stores such as Macy’s and Ann Taylor offered discounts of up to 70 percent and still saw decreases in sales. Electronics stores such as Circuit City, which usually see higher sales than anyone during the holidays, have sought bankruptcy protection this year.
Unemployment is the highest it’s been in 15 years. As consumers face tightening credit and a recession, spending is being reduced to necessities rather than luxuries.
What took the biggest hit?
Women’s clothing sales from Nov. 1 to Dec. 24 dropped 24 percent compared to last year. Electronics and appliances saw even deeper cuts, falling 27 percent. Luxury items such as jewelry dropped 35 percent, a clear sign that average American consumers are saving their extra cash, if they have any, for necessities.
Overall online sales saw a 2.3 percent decrease, a very small drop compared to the above mentioned retail sales. However, since the inception of online shopping, Internet retail companies have seen year-over-year increases of 15 to 20 percent.
Bringing it home
Online spending at U.S. retailers decreased 1 percent. In 2007, the nation’s online retail sales rose 19 percent. The U.S. economy shrank .5 percent between July and the first of October, the biggest drop since 2001. Consumer spending during that period was lower than it has been for three decades. Analysts expect more economic declines to end the year.
Now what?
Today, in what many are calling “Black Friday: The Sequel,” many stores are offering discounts of up to 90 percent to try to make up for the dismal holiday sales. Stores including Macy’s, JCPenney’s and Fry’s Electronics opened early today and offered the biggest discounts of the year.
It remains to be seen whether this strategy will help retailers. More Americans are losing their jobs, and more still don’t have credit to rely on any more. It looks like even with the option of online payday loans it’ll be a while before consumers have extra cash to spend on non-essentials.
While Amazon is definitely one of the greatest online retailers, if not the best, I still think its a little naive on the part of consumers to think that you’ll automatically get a better deal online. If you can save $10 on average by using Amazon, I bet a lot of people are not taking shipping and handling into account, and S&H can add up in a hurry.
As the economy gets worse, even those who have jobs are afraid to spend every last dime on Christmas because one never knows when they may be laid off due to budget cuts.