US Online Retail Sales to Decline in 2009

Online retail sales in the US are anticipated to fall 11% this year due to worldwide economic turmoil and low spending by consumers.

The growth rate of e-commerce in the US is expected to slow down to 11% in 2009 as consumers will reduce their spending, as reported by Reuters. The growth is projected to slip from 13% in 2008 and 18% in 2007.

The country is expected to see an online expenditure of US$ 156 Billion this year, higher than US$ 141 Billion recorded last year.

According to a Research Analyst at RNCOS, “With consumers becoming more vigilant of spending, online retail sales declined during the holiday season. Also, retail sales may hit back the seasonal low points post-holidays as over the coming weeks, retailers will stop offering heavy discounts on the items. Moreover, they need to be more innovative in order to save themselves from the challenges that are likely to occur in Q1 2009.”

2008’s holiday season was really challenging for both offline and online retailers due to the global economic recession and also, as this time shoppers got five days less to shop between Thanksgiving and Christmas. Resultantly, the industry registered a slow growth rate for the first time during the holiday season since 2001.

Despite heavy discounts, global financial downturn and unfavorable pre-holiday season together accounted for the worst holiday season after 1970. Further, reduction in discretionary spending and the inclination of people to save most of their income to reconstruct savings and wealth prompted them to cut their purchases.

Moreover, present economic situation and weak consumer confidence due to decline in discretionary income and increasing unemployment will keep the consumers away from the retail stores in 2009 also. However, sharp cutbacks in retail inventory in 2009 are likely to strengthen the profit margins of the retailers, despite the weak sales.

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