Holiday Web Sales Growth May Climb Most Since 2007

U.S. online sales this holiday season are poised to climb the most since 2007 as retailers entice consumers with free shipping and half-off deals.

E-commerce sales in November and December will rise 11 percent to $32.4 billion, researcher ComScore Inc. said last week, an increase from its previous forecast for as much as 9 percent growth. Online sales today, known as Cyber Monday because consumers increasingly log on to shop the day after the Thanksgiving weekend, may top $1 billion for the first time, said Shawn Milne, a Janney Montgomery Scott LLC analyst.

Consumers are beginning to loosen their purse strings as the economy recovers from the recession and adds jobs, U.S. Commerce Department figures showed last week. Online stores may also benefit as shoppers become increasingly comfortable buying over the Web. E-commerce companies will account for 7 percent of total retail sales this year, up from 6 percent last year, Forrester Research Inc. estimated.

“The beginning of the online holiday shopping season has gotten off to an extremely positive start, outperforming our earlier expectations,” ComScore Chairman Gian Fulgoni said in a statement. “While this early spending surge reflects, in part, heavy promotional activity on the part of retailers occurring earlier this season, it is nevertheless a very encouraging sign.”

An early indication of holiday sales over the Internet came Nov. 26, the day after Thanksgiving, when online sales tallied $648 million, a 9 percent increase from the corresponding day a year earlier, ComScore said yesterday.

‘Pronounced Shift’

The National Retail Federation coined the term Cyber Monday in 2005. Almost nine in 10 retailers have special promotions planned for Cyber Monday, according to Shop.org, a division of the Washington-based trade group.

“The pronounced shift to e-commerce is going to be even more this holiday,” said Siva Kumar, chief executive officer of TheFind.com, a shopping search engine that competes with Google Inc.

PayPal, which says it processes about 16 percent of online payments in the U.S., reported a 21 percent increase in payment volume through its service as of 2 p.m. New York time today, compared with the same time period last year. ComScore plans to release Cyber Monday results tomorrow.

The holiday shopping period that begins after Thanksgiving is closely watched by investors because online sales each day become the equivalent of a week’s worth during the non-holiday period, according to Milne at Janney Montgomery Scott.

Free Shipping Offers

Retailers count on November and December for about 20 percent of their annual profit.

During the 2007 holiday season, Internet sales grew 19 percent to $29.2 billion, according to Reston, Virginia-based ComScore. They declined the following November and December amid the U.S. recession before growing 4 percent to $29.1 billion in 2009.

Wal-Mart Stores Inc., the largest retailer, introduced free shipping for the holiday season on about 60,000 Walmart.com items. Amazon.com Inc., the biggest online retailer, matched the offer. Daily deals from sites such as Groupon.com may also help boost sales.

This competitive behavior by retailers may help sales today rise 15 percent to 20 percent, compared with 5 percent growth last year, according to Milne at Janney Montgomery Scott.

To contact the reporter on this story: Joseph Galante in San Francisco at jgalante3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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