Online retail leads holiday sales


From left, a Kindle Touch, Kindle Fire tablet and new Kindle are displayed at a press conference in New York in September.Amazon.com said Thursday that its e-book reader, the Kindle, and its multimedia cousin, Kindle Fire, set sales records this holiday season. The company said it sold more than 1 million Kindle products per week in December. (EMMANUEL DUNAND/AFP/GETTY IMAGES)
December 29, 2011

In the annual race for holiday sales, a clear winner has emerged: online retail.

The sector has enjoyed steady double-digit growth over the past two months compared with last year, providing a stable counterpoint to the broader industry’s more volatile season. Cyber Monday alone raked in a record $1 billion, according to analytics firm comScore. This week, the company said online spending during the holidays reached more than $35 billion, a 15 percent spike from a year ago.

“It’s represented a big rebound since the recession,” said Andrew Lipsman, comScore’s vice president of industry analysis. Online sales fell 4 percent during the depths of the financial crisis in 2008 and have been climbing back ever since.

Online spending is a rare bright spot in what has been an uneven Christmas season for the retail industry. Government data show consumers have had to dig into their savings and turn to credit cards to finance even meager increases in overall spending. Bricks-and-mortar retailers reported that the throngs of shoppers who crowded their stores for blockbuster deals during extended hours Thanksgiving weekend were largely absent the rest of the month and in early December.

The National Retail Federation, a trade group, predicts that total holiday sales will rise by 3.8 percent to a record $469 billion — above the industry’s 10-year average but lower than the 5.2 percent increase last year.

Of course, some of that increase is being driven by online spending, which accounts for roughly 10 percent of retail sales. In some cases, consumers are simply shifting their purchases from bricks-and-mortar stores to the Internet. ComScore estimates that as much as 30 percent of consumer electronics are bought online.

But Internet retailers are also forging new territory. Amazon.com said Thursday that its e-book reader, the Kindle, and its multimedia cousin, Kindle Fire, set sales records this holiday season. The company said it sold more than 1 million Kindle products per week in December.

Still, Amazon said in the fall that keeping the Kindle Fire priced lower than rival Apple’s iPad is hurting its profit margins. The online behemoth is hoping it can make up the difference by selling multimedia content to Kindle users.

“I like to think of content as being the gift that makes all these electronic gadgets that we get for the holidays really worthwhile,” said Carl Howe, vice president of data sciences research at Yankee Group. “They’re betting on the lifetime value of the product.”

Mobile downloads for devices such smartphones and tablets have become another rapidly growing sector of retail. Amazon said it hit sales records on Christmas Day for downloads of Kindle books. ComScore said digital content accounted for 20 percent of online sales on Christmas — and it only calculates purchases made through a computer. Mobile analytics firm Flurry reported that consumers downloaded more than 242 million apps on Dec. 25, more than double the average for the rest of the month.

Digital content, however, isn’t the only thing mobile shoppers are interested in. IBM Coremetrics Benchmark measures sales data from 500 retailers and found that mobile spending more than doubled on the day after Christmas compared with the previous year, with iPad users leading the surge.

“Consumers are still buying real products, things that are shipped and things that are consumed and used within your home,” said John Squire, chief strategy officer of IBM Smarter Commerce.

Ylan Q. Mui is a financial reporter at The Washington Post covering the Federal Reserve and the economy.
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