Online retailers are not off the hook when it comes to feeling the economic malaise, with online sales only up by 1 percent in October, making for the lowest monthly growth rate since 2001, according to researcher comScore.
Retail e-commerce growth has fallen from its height of 28 percent in August 2007 to near flat in October 2008, said the report on Tuesday.
The American consumer’s psyche is troubled by the jobs market deteriorating at an alarming pace and the financial market meltdown, comScore reported. That fear has only intensified by the continous bad news American consumers are seeing these days.
The Labor Department recently reported that 240,000 jobs had disappeared in October, or 1.2 million for the year, bringing the unemployment rate to 6.5 percent and the total number of unemployed Americans 10.1 million.
But it will get gloomier as the government expects the number to quickly raise to some 8 percent, the highest percentage since 1983.
Hearing President-elect Barack Obama last week say during his first news conference that “It’s not going to be quick, and it’s not going to be easy to dig ourselves out of the hole that we’re in,” couldn’t offer much reassurance to American consumers either.
Households with lower incomes are the ones that worry the most and that most drastically cut their online spending.
Families making less than $50,000 reported a 3 percent decline in online spending over the last three months, while households with income between $50,000 and $100,000 showed a modest growth rate of 1 percent, and those making at least $100,000 increased their online spending at a healthy rate of 14 percent, the report said.
“Goods sold online are often discretionary, and as necessities like food and energy have become more expensive, people have less discretionary income,” said Gian Fulgoni, chairman of comScore, in the report.
In October, sales of music and movies dropped 38 percent; sales of clothes, books, computer software, video games, flowers, toys, and jewelry also declined.
Yet all these items tend to be high on everyone’s Christmas list and a slowdown before the Christmas shopping season is worrying.
“With the financial markets still volatile and more job cuts looming, it would appear the only near term ray of hope for this year’s holiday shopping season is that the sharp drop in oil prices will cause an easing in inflation and provide a much needed boost in consumers’ spending power,” Mr Fulgoni said in the report.
On Tuesday, Barclays Capital cut fourth-quarter earnings estimates on Amazon based on continued deterioration in retail.
Amazon shares were down $3.21, or 8.09 percent, in midday trading at $36.48.