Click and Spend

Following eBay's (EBAY) weaker-than-expected guidance that reflects what its management team called a dramatic deceleration in the U.S. e-commerce growth rate compared to the second quarter, I did some digging to see if there was any other confirming data. According to ComScore, U.S. online retail spending growth has slowed, with online retail spending growing 13% year over year in July and August compared to 16% for all of the second quarter 2013. That is like comparing apples to oranges given that August includes the bulk of back-to-school spending. Looking in the rearview mirror, however, we know that back-to-school spending this year was weaker than expected. Moreover, with Standard & Poor's estimating that the government shutdown took 0.6 percentage points off GDP this quarter and Washington hitting the snooze button on the debt ceiling, consumers are likely to be a little more tightfisted this year. A month ago, ShopperTrak published its forecast for the 2013 holiday shopping season that called for a decline in spending year over year. Specifically, that forecast calls for retail sales in November and December to rise by only 2.4% year over year -- that's less than the 3% increase in 2012 and below gains of around 4% in 2011 and 2010. It doesn't take a mathematician to see that calls for some of the weakest holiday spending we've seen in the last few years -- and that was before the impact of the government shutdown. This week, the National Retail Federation shared its view that consumers are planning to spend less this year than last. That's backed by a RetailMeNot study showing that more than a third of respondents in the U.S., France and U.K., respectively, said they expect to spend less in November and December this year than they did last year. The figure that jumped out at me from RetailMeNot's findings was that one in four U.S. shoppers are already worried about the cost of the December holidays. That doesn't bode well for the holiday season this year. But don't be alarmed, the NRF's data suggest that your family and loved ones will still treat you well this holiday season -- though it means cutting back on gifts for friends, candy and food, decorations, greetings cards and the like. The bright spot in the findings from both the NRF and RetailMeNot was online shopping. Digging into RetailMeNot's data, roughly 90% of Americans plan to do at least some holiday shopping online and that figure is above the international average of 84%. Online shopping is expected to be particularly popular in China, the U.K. and Germany. Shop.org forecasts online sales growth between 13-15% this year to as high as $82 billion -- that's just shy of 14% of the more than $600 billion the NRF expects consumers to spend this holiday season during November and December. So how does this match up against eBay's comments and the data from ComScore? It could mean that we will see online shopping pick up as seasonal spending increases in the current quarter. It could mean that eBay is sandbagging its outlook. It could also mean that eBay is seeing some share loss at the hands of Amazon (AMZN), Macy's (M), a still somewhat new online effort at T.J. Maxx by the TJX Cos. (TJX) and others, as well as a renewed online retail effort by Google (GOOG). While it may sound like I am repeating myself this year, the reality is if online shopping continues to take share from brick-and-mortar stores it bodes well for a seasonal trade in UPS (UPS) and FedEx (FDX). Those two companies are also benefitting from a $0.48 per gallon drop in gasoline prices year over year, according to the U.S. Energy Information Administration, which should aid margin comparisons year over year. After all, if you order online, your merchandise still needs to get to where you are having it sent.

Click and Spend

Holiday shopping is alive and well in cyberspace.

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