Fight the Recession

The mainstream media loves injecting fear into the already crippling economy. The article below, which appeared in the NY Times Bits blog, is no exception. I simply don’t buy it. Granted the largest e-tailers who have reached market saturation will be affected by a significant decrease in sales,  but the average small to medium online business can grow exponentially – even in these troubled times. Most online business have only a fraction of the market share in their respectve industries. Instead of moping about a drop in sales, what they should be doing is using every method possible to get a bigger piece of the pie. At a time when many online etailers are choosing to join the parade and wait out the recession, smart business owners can use this opportunity to gain traction while the “proverbial rabbit” sits on the sidelines.

Don’t live the recession. Turn off your television, close the newspaper, and imagine a thriving economy. For most businesses, there’s no gloomy forecast for e-commerce sites, there’s a gloomy forecast for those that go with the flow.

Gloomy Forecast for E-Commerce Sites

Annual e-commerce sales will shrink for the first time this year, according to eMarketer. The research firm issued its revised e-commerce forecast Thursday, predicting that shoppers will spend 0.4 percent less online this year than last year.

“We’re seeing a very sober picture — it’s going to be rough this year,” said Jeffrey Grau, a senior analyst at eMarketer. “However, maybe as early as next year, things will begin to pick up where they left off.”

Until last year, e-commerce sales had posted double-digit increases every year since people started buying things online. In 2007, consumers spent $123 billion on Web sites, up 21 percent from 2006 and up from $42 billion in 2002, according to comScore.

The double-digit growth rates continued in the first half of 2008, but by the fourth quarter, sales dipped despite holiday shopping. In 2008, shoppers spent $133.6 billion online, and that will fall to $133.1 billion this year, eMarketer predicted.

Of course, people are not shopping offline either, and in February, the offline retail industry had only a 0.7 percent sales gain, buoyed by strong sales at Wal-Mart.

“The fundamental trend is that consumers are shifting a greater share of their discretionary income from stores to the Internet,” Mr. Grau said. Though people are not spending much discretionary income these days, Web sites will most likely benefit once they start shopping again. “The core Internet shopper is an affluent consumer. They’re being hit now like everybody else, but we think once the economy improves, there will be a lot of pent-up demand and we’ll see more spending,” he said.

Until 2003, most of the growth in e-commerce sales came from new shoppers migrating online. Now, most people who intend to shop online are already doing so, Mr. Grau said, and when growth resumes, it will come from people shifting more of their spending from malls to the Web.

“Consumers are more comfortable now buying big-ticket and bulky items online — a refrigerator or a sofa or jewelry,” he said. That is in part because Web sites have been offering more research materials for online shoppers, such as shopping guides and user product reviews, he said.

EMarketer thinks spending will recover in 2010. “Our forecast is optimistic, because there are some economists saying it could be a lot worse this year,” Mr. Grau said.

Only about 6 percent of consumers’ total spending is now online, he said, and it will probably top out at 15 to 20 percent. Still, the Web will drive retail spending in another way: “The real contribution of the Internet may be people who research online and make store purchases that are influenced by their online research,” he said.

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