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Expect U.S. eCommerce to Exceed 6% of Total Retail Sales for Q4 2011

The importance of Cyber Monday in the online channel should not be understated. Cyber Monday 2010 was the first time online spending in the United States exceeded $1 billion in a single day. 2010 also marked the first year that Cyber Monday was the busiest online spending day in the United States, which is impressive considering the first Cyber Monday was only five years prior.

Cyber Monday has been growing in sales and popularity each year since it was conceived. It was only the twelfth largest online shopping day of the year in 2006 but became the third largest online shopping day in 2008. In 2009 Cyber Monday became the second largest shopping day of the year and finally in 2010 Cyber Monday broke $1 billion and was the year's largest online spending day for the first time.

In 2011 Cyber Monday online sales increased an additional 22 percent, exceeding $1.25 billion and setting a new record for the most spent online in one day in the United States. Retailers will be surprised, although not disappointed, if Cyber Monday isn’t the largest online shopping day again in 2011. Online sales from the first Cyber Monday to the most recent are shown in the graph below along with the percentage growth year over year.

Online sales have continued to increase in the United States even as the economy and brick-and-mortar retail sales stagnated from 2008 to 2010. Black Friday, however, has persisted as one of the most important shopping days in the retail world with brick-and-mortar sales reaching $11.4 billion and online sales exceeding $800 million for this day in 2011. Brick-and-mortar sales on Black Friday have exceeded $10 billion since 2007, but sales remained relatively flat from 2007 to 2010 during tumultuous economic times. Over this time frame, however, more consumers have sought online deals and avoided the Black Friday crowds as online sales on Black Friday have steadily increased from 2008 to 2011, and with an especially large increase this year.

The bulk of retail sales in the United States comes in the Customer Present space, the $1.25 billion spent online during Cyber Monday is only 10 percent of the volume spent in stores on Black Friday. However, more consumers are shopping online, not only on Cyber Monday, but also on Black Friday and year-round. Combining online and brick-and-mortar sales for Black Friday only 3.5 percent of the sales volume was transacted online in 2005, but this grew to nearly 7 percent in 2011.

These early holiday shopping figures are great for retailers, but the online retailers stand to gain the most. The trend of more consumers migrating from the brick-and-mortar to online channel isn’t only happening for the holiday season, but it continues year round. The U.S. Department of Commerce and Census Bureau have been tracking this for quite some time, and over the past decade the percent of quarterly retail sales in the United States that occurred online has grown from barely 1 percent in 2002 to 4.6 percent in the third quarter of 2011. Only 4 percent of retail sales in the U.S. were online in the third quarter of 2010, but this grew to 5.1 percent in the fourth quarter during the holiday shopping season. With the strong online sales for both Cyber Monday and Black Friday we should expect the portion of retail sales made online to further increase.

The fourth quarter is the biggest and most important quarter for most every retailer, and for the past several years it has been the quarter when the highest percentage of retail sales in the United States have been made online. Notice each of those red spikes in the Census graph above, those are all occurring in the fourth quarter when the portion of retails sales made online is at it's highest for each year. The blue line is adjusted to smooth out these seasonal fluctuations, but it should be noted that the first and fourth quarters in the United States have had the highest eCommerce activity over the past decade.

Using online sales on Black Friday and Cyber Monday as a leading indicator for the percentage of retail sales that will be made online in the United States during the fourth quarter The Fraud Practice estimates 6.02 percent of total retail sales in the United States to be transacted online during the fourth quarter of 2011. The graph below charts the Black Friday and Cyber Monday sales from 2005 through 2011 including the (non-seasonally adjusted) percentage of retail sales conducted online in the fourth quarter through 2010. A regression analysis was performed to measure the effects of Cyber Monday and Black Friday online shopping on the total percent of retail volume that was transacted online for the entire fourth quarter from 2005 through 2010. The coefficients from this analysis were then applied to the Cyber Monday and Black Friday sales from this year to forecast the total percentage of retail sales in the United States that will be conducted online for the fourth quarter.

Each holiday season more consumers shop online looking for deals, and after a positive experience they are inclined to shop online again. Since 2005 online spending has increased on Cyber Monday and Black Friday, and each time online retail sales have grown to hold a larger portion of total retail sales in the U.S. for not only the fourth quarter, but also the following year. Expect the momentum of online sales to carry through the holiday season and for online retail sales to take an even bigger slice of the pie in 2012.

It is estimated that around 20 percent of a retailer’s annual sales revenue comes during the holiday season, and this holiday shopping season really begins on Black Friday. To put things in perspective consider this: the sites with the most consumer traffic on Black Friday this year where Amazon, Walmart, Best Buy, Target and Apple. Each of these businesses are ranked in the top 25 in terms of gross online sales revenue for 2010, and three of the five are in the top ten. Also, Amazon is the largest online retailer in the U.S. and Canada and in 2010 their online sales grew nearly 40 percent from the previous year following a very strong Cyber Monday and holiday season. Each of the other retailers with the most traffic on Black Friday enjoyed double digit growth in online sales from 2009 to 2010 as well. Consumers are spending more online and the most are going to big name and established retailers they trust. This is how many consumers “break the ice” with online shopping, but great deals and positive experiences keep them coming back. Amazon, Apple, Target, Walmart and Best Buy realized substantial growth in online sales for 2010 capped off with a strong holiday season. With a tremendous beginning to 2011’s holiday season expect continued growth in eCommerce and online sales, but with much of this growth being benefitting the well-known, established eCommerce brands.


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