Online spending (not including travel) in October 2008 grew by only 1 percent over October 2007, the lowest monthly growth rate since comScore, Inc. began tracking e-commerce in 2001.
The overall softness was precipitated by curtailed spending across mid to lower income segments, with households earning less than $50,000 exhibiting negative spending growth compared to a year ago.
“While rising prices remained consumers’ biggest concern in October, it’s clear that the increase in the country’s unemployment rate along with the shock of the financial market meltdown have had a negative impact on the psyche of the American consumer, and the effects were clearly felt in the online retail sector,” said Gian Fulgoni, chairman comScore, Inc., the Reston, Va.-based company that measures digital data. “October represented the softest single-month of online retail growth on record, and we can only hope that the recent sharp drop in oil prices will cause a continued easing of inflation and a strengthening in consumer spending as we enter the critical holiday shopping season.”
ComScore’s review of monthly retail e-commerce growth rates depicts the slowdown in the U.S. retail economy. Retail e-commerce growth rates have fallen from a height of 28 percent in August 2007 to a growth rate of just 1 percent in October 2008. October represents the sixth consecutive month this year of slowing growth rates.
A three-month trailing average of retail e-commerce spending reveals that the low and middle income segments are responsible for much of the softness, comScore reports. Overall, online retail spending from August through October grew just 4 percent versus year ago, with spending declining by 3 percent among households making less than $50,000. Households with income between $50,000 and $100,000 showed marginally positive spending growth (1 percent), while those making at least $100,000 increased their spending at a healthy rate of 14 percent.
The company also conducted surveys in July and October which reveal a marked shift in consumers’ top economic concerns. Specifically, while rising prices remained the top overall economic concern in October, it’s clear that consumers have become increasingly worried about unemployment/job security and the health of the financial markets. Households earning at least $100,000 indicated that the state of the financial markets was their biggest economic concern, with a sharp increase from 14 percent in July to a 49 percent in October. Those earning less than $100,000 showed marked increases in concern about unemployment and job security.
“It’s clear that worry, concern and even fear are the prevailing consumer sentiments at the moment, and this is causing all income segments to pull back their spending,” Fulgoni said. “With the financial markets still volatile and more job cuts looming, it would appear the only near term ray of hope for this year’s holiday shopping season is that the sharp drop in oil prices will cause an easing in inflation and provide a much needed boost in consumers’ spending power.”