As a holiday sales season charged with challenges gets underway, "online shopping" has become a hopeful buzzphrase.
Brick-and-mortar retailers are opening earlier than ever, staying open longer and planning deep discounts to compensate for weakened consumer spending and a shopping season that is six days shorter than last year's — a scenario that will pit retailers' results against tough comparisons from the year-ago period.
Despite the hurdles, the National Retail Federation forecasts that sales during 2013's 26-day season will hit $602.1 billion, up 3.9% over the $579.5 billion tally from last year's 32-day shopfest. The NRF expects online shopping to jump 13% to 15%, to as much as $82 billion. That would equal about 14% of the total retail haul — up from 12% for the 2012 season.
Aggressive strategies from Internet retail heavyweights Amazon.com (AMZN) and Ebay (EBAY) reflect the tone of the season. But competing efforts through retail and online channels — from Wal-Mart (WMT) to Groupon (GRPN) — pledge a lively joust.
And They're Off — Early
By end of the first week in November, 54% of Americans had started holiday shopping, according to the NRF. Some 46% had yet to start, the smallest percentage to get an early start in the survey's history.
NRF Vice President Artemis Berry says marketing to users of mobile devices — smartphones and tablet computers — has become a key factor.
"We are not only seeing continued growth (of online shopping), but a vastly different landscape, with major adoption from both large companies and mainstream companies," of mobile technology, Berry told IBD.
Sales via smartphones and tablets are growing faster, but PC sales still rule the online roost.
Last quarter, total sales via desktop PCs grew 13% vs. the same quarter a year ago, to $47.5 billion, according to market tracker ComScore. Sales via smartphones and tablets vaulted 26%, but to a much smaller $5.8 billion, That put mobile sales at just over 10% of e-retail's total $53.3 billion take for the quarter.
Although the 13% rise in desktop sales was in line with gains since Q2 2011, it was down from 16% the prior quarter.
The report offered an additional caution, noting that larger economic indicators also suggested softening discretionary spending. ComScore Chairman Gian Fulgoni said the change "offers some cause for concern as we head into the holiday season.
In the third quarter, Amazon.com saw revenue of $17.1 billion and Ebay sales were $3.9 billion, giving the two roughly a third of the total online take.
Despite its dominance, Amazon.com took no chances. It launched its revolving Black Friday promotions five days early on Nov. 24 instead of what's typically expected to begin early on the day after Thanksgiving. Ebay waited to see the whites of shoppers eyes — on Thanksgiving Day — to begin its promotions for the season.
In the shade of the big e-retailers, an infestation of competitors is striving to carve a share of the e-pie.
Eric Lefkofsky took the chief executive post at Groupon in February and is using mobile technology to help transform the one-time daily deals site into a full e-commerce marketplace in the image of Amazon.com. On a Nov. 8 earnings call, Lefkofsky said more than 60 million mobile consumers had downloaded its app.
Groupon shares have rebounded 87% so far this year, but remain 71% below the Nov. 2011 high, set on the day of the stock's IPO.
Other players chiseling out smaller niches are producing mixed results. Los Angeles-based Stamps.com (STMP) provides online mailing and shipping services targeted to home offices and small business. Analysts project a 36% earnings gain for this year, slowing to 6% growth for 2014. Still, shares are up 83% year-to-date.
Moms, babies and kids-wear retailer Zulily (ZU) offers daily sales. The Seattle-based outfit launched its initial public offering Nov. 15 at $22 a share. It popped 38% its first day before pulling back. On Friday at 35, it was trading 15% below its opening day high, but still 59% above its IPO price.
Meanwhile, traditional brick-and-mortar retailers such as Macy's (M) and Walgreen (WAG) are expanding their digital scale through acquisitions and partnerships, blurring the line between online and in-store sales.
On Sept. 19, Macy's announced it will partner exclusively with Apple (AAPL) for its iTunes Radio launch. In 2011 Walgreen broadened its online footprint with the $429 million purchase of online retailer Drugstore.com.
Looking to capitalize on the Cyber Monday surge in consumer electronics sales, Wal-Mart was launching its electronics campaign on Saturday, Nov. 30, and extending the promotions through the week. Both Wal-Mart and Amazon.com offer free shipping on sales above $35.
Ebay last-year christened its Ebay Now service, which partners with Target (TGT), Macy's, Best Buy (BBY) and others to lure mobile shoppers specifically. Introduced in San Francisco and still in a testing stage, the service pledges one-hour delivery on items bought from those physical stores by mobile shoppers via Ebay's marketplace. The company plans to make it available in 25 metro areas by 2014.
Amazon announced Nov. 11 it has partnered with the U.S. Postal Service to provide Sunday deliveries in Los Angeles and New York. Plans call for rolling that expanded service out to most of the country in 2014.
The whole crew is feeling increased rapid-delivery heat from search leader Google (GOOG). The Mountain View, Calif.-based juggernaut is beta-testing front-door delivery in the San Francisco and Silicon Valley areas of items sold by partners Target, Walgreen, Whole Foods Market (WFM) and Staples (SPLS).
Researcher ShopperTrak provides data on brick-and-mortar retailers, not e-commerce. But founder and Executive Vice President Bill Martin says effects of the shift to e-commerce on department store operators are obvious.
"In 2002 we saw close to 10.02 billion store visits (for the year). In 2012 we were seeing 8.59 billion visits," as shoppers migrated online, Martin told IBD, adding that today, "Mobile is what it's all about.
The Worldly Wise Web
Beyond the U.S. holiday season, Amazon dominates the global Internet retail market. Its rising competitors include China's Alibaba. The retailer is part marketplace like Amazon, part online auction house and payments processor like eBay. Yahoo (YHOO) owns about 24% of the company. Japan's SoftBank owns 37%.
Alibaba is expected to see $5 billion in revenue this year, a fraction of Amazon.com's projected $75 billion take. But during its annual shopping festival, held Nov. 11, Chinese shoppers reportedly spent more on Alibaba than U.S. consumers will via all online channels during both the Black Friday and Cyber Monday outings.
Taobao and Tmall, Alibaba's two main shopping venues, reported merchandise volume last year totaled about $160 billion, more than Amazon.com and eBay combined. Chief Executive Jonathan Lu has said the company plans to triple its volume by 2016.
Alibaba is planning an initial public offering, and news sources say it is leaning toward U.S. exchanges after talks with the Hong Kong Stock Exchange folded in September. Analysts estimate the offering could raise $10 billion to $15 billion. Estimates for valuation ranging from $75 billion to $100 billion, making it potentially the largest IPO since Facebook's (FB) controversial May 2012 send off.
On a much smaller scale, China's Vipshop (VIPS) is an online discounter of brand-name goods, with projected annual sales of about $1.6 billion this year. That's almost equal to Alibaba's Q3 revenue, and a fraction of Amazon's forecast total sales of $75 billion this year.
Vipshop currently sells only in China. But its goal is to "make great efforts to help the south China area become the international e-commerce hub." Among its top labels are Disney (DIS) branded children's clothes, Italy's Giovanni Valentino leather bags and Philips (PHG) electric razors.
Vipshop went public on the NYSE last year at $6.50 a share. On Friday it traded more than 1,100% above that price.
Argentina's MercadoLibre (MELI) is sometimes called South America's Amazon. Its rapid growth in its primary market, Brazil, prompted JP Morgan to raise its price target to 112 from 109 on Nov. 18, although it maintained a neutral rating. With annual sales of about $442 million, it has yet to break out on to the world stage.