The Commerce Department reported Thursday that retail sales rose 0.3% in November after falling 0.3% in October. Retail spending over the past 12 months has grown 3.7%, in line with modest economic growth. Even as many Americans struggle to find jobs and pay bills, one sector of the economy has been resilient in this weak economic environment. Wealthy Americans are continuing to spend their money and Web sites like Gilt — a flash sales site that offers discounts on designer apparel and jewelry as well as deals on exotic vacations, restaurants, Broadway shows and gym memberships -- have experienced a surge in sales as high-end consumers chose online shopping over brick-and-mortar stores.
Even the prospect of higher taxes next year has had little effect on the shopping habits of these individuals. Kevin Ryan, CEO and founder of Gilt, estimates that sales for the current quarter will increase 30% from the same period a year ago. The site saw a 60% year-over-year gain during the Thanksgiving holiday weekend. According to Ryan, online shoppers tend to be wealthy consumers and he expects all online players will "do very well" this holiday season.
Online commerce has exploded largely due to the shift in consumer preferences for mobile devices. According to Sucharita Mulpuru, an analyst at Forrester Research, eCommerce sales touched $200 billion in 2011. Online sales are projected to grow to 9% of total retail sales by 2016 from the current 7%. Nearly 167 million consumers, or 53% of the U.S. population, shopped online last year.
Ryan says Gilt customers are consciously reducing their time spent shopping the racks in physical stores, and he refers to mobile as the "dominant player" in the online world. Mobile devices accounted for 60% of the site's traffic last week alone, Ryan notes, with Apple's iPhones and iPads as the main source of page views. Sales via mobile devices could even comprise 50% of Gilt's revenue by next year. The expensive items for sale on Gilt are more likely to be sold on tablets than smartphones, Ryan says, a trend Forrester confirms.
"Given the smartphone's considerable screen size limitations and consumers' preponderance to use smartphones for research and social shopping activities, it is hardly surprising that just 2% of all U.S. eCommerce is actually transacted on smartphones. By contrast, the mobile sales growth opportunity appears to lie squarely with tablets," writes Mulpuru in a recent report.
Ryan sees a future for daily deals sites but believes there will be considerable consolidation in the industry. Groupon, despite its recent trouble, will likely hold onto its top spot but competitor LivingSocial may ultimately fold, Ryan predicts.
Overall, mobile has been changing how consumers shop and traditional retailers are going to have to adapt to stay in the game.
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