January E-Commerce Seen Up 2%, But Bottom Remains Elusive
20 February 2009 - 4:30AM
Dow Jones News
E-commerce activity rose 2% in January, according to one widely
watched measure, offering a glimmer of hope for Internet retailers
such as eBay Inc. (EBAY) and Amazon.com Inc. (AMZN) even as
industry insiders say the sector has yet to put the worst behind
it.
Market research group comScore said online sales rose in January
largely because middle-class consumers went bargain-hunting. The
monthly data follows comScore's report last week that
fourth-quarter retail e-commerce sales fell 3% from the same period
a year earlier, marking the first quarter of negative growth since
the company began tracking spending in 2001.
"I have my fingers crossed that we might well have reached the
bottom," comScore Chairman Gian Fulgoni said in an interview. The
company was scheduled to present its data in a conference call at
noon EST Thursday.
ComScore's data comes after the biggest e-commerce companies
reported mixed earnings for the quarter ended Dec. 31. Amazon,
which said the holiday season was its best ever, reported an 18%
surge in fourth-quarter sales despite the difficult market
conditions. EBay reported its first-ever quarterly revenue
decline.
Despite comScore's data, many industry insiders and observers
say the $130 billion U.S. e-commerce market is likely to get worse
before it gets better.
"We can expect really tough times ahead for a number of months,
easily through the first half of the year," said eMarketer
e-commerce analyst Jeffrey Grau. "I don't see signs of
improvement."
The conflicting outlooks come amid a sharp slowdown in the
economy that hammered consumer spending both online and through
traditional retail outlets during the fourth quarter. Last week,
the U.S. Commerce Department said overall retail sales staged a
surprise 1% rebound in January as stores cut prices. It was the
first month-to-month gain after six straight months of declines,
but economists cautioned that sales could slip again as consumers
cut spending.
In addition to fueling the performance of online shopping sites,
the health of the e-commerce sector is important to top online
advertising companies. Market leader Google Inc. (GOOG) said its
fourth-quarter advertising revenue held up fairly well because
retailers had stocked a lot of holiday inventory and consumers
flocked online to search for the best deals. But last month,
company executives said they were concerned the dynamic may have
played itself out going into the first quarter of 2009.
"One of the things we have to ask ourselves now is how much of
that inventory has actually flowed through the system," said
Jonathan Rosenberg, Google's senior vice president for product
management. "Obviously, we would be adversely impacted if it was
less total commerce moving through."
Shares of e-commerce and online advertising companies have been
hit since the economic turmoil began weighing on markets.
Early Thursday, Amazon, whose shares had dropped more than 30%
from their 52-week high, were up 0.7% at $62.82. Ebay, down more
than 60% from its 52-week high, was down 1.8% at $12.27. Google
shares, off more than 40% from a 52-week high, were down 1.5% at
$347.68.
Few industry participants believe e-commerce activity has
bottomed out. Scot Wingo, chief executive at e-commerce software
maker ChannelAdvisor Corp., said the value of Internet retail sales
processed by his company's software in January was flat from the
same period last year. That compares with a 2% increase in the
fourth quarter and suggests the downward momentum in sales has
continued into early 2009.
Barclays Capital analyst Doug Anmuth said in a note earlier this
week that checks with search engine marketers indicated shoppers
and advertisers immediately pulled back spending in early
January.
Anmuth's conclusion was echoed by search engine marketer Reprise
Media, which told Dow Jones that spending on Internet search terms
by its e-commerce customers was down about 10% in January compared
with December.
Reprise, a subsidiary of ad giant Interpublic Group of Cos.
(IPG), also said online consumers are comparison shopping to a far
greater degree than they used to, which points to an e-commerce
market that continued to soften in the first month of 2009.
-By Scott Morrison, Dow Jones Newswires; 415-765-6118;
scott.morrison@dowjones.com