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Breakneck Web Sales Slow For Holiday And Year

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By MATT RICHTEL, The New York Times

Published: December 31, 2007

SAN FRANCISCO - The latest mixed bag of news for retailers hails from cyberspace: holiday e-commerce sales were robust but showed their slowest-ever growth, industry analysts projected.

The sales growth of 19 percent, while enviable for traditional retailers, was down sharply from the 25 percent to 30 percent growth rates of recent years.

Retail industry analysts said the deceleration underscored a tight economy but also reflected changing consumer and retailing habits.

And it is consistent with a broader slowdown in the growth rates for Internet retailing - making the holidays of 2007 a vivid example of the changing growth curve for online sales.

When the receipts are tallied from this holiday, American consumers will have spent about $29.5 billion at Internet shops, according to projections published by comScore, a market research firm.

"The growth rates for previous years were clearly much higher," said Andrew Lipsman, spokesman for comScore.

The research firm did not have growth rates before 2003, but Lipsman suspected that they were 25 percent or more.

It also is far higher than the rate of growth in offline sales, according to preliminary projections. This week, MasterCard Advisors, a division of the credit card company, estimated that sales grew 3.6 percent from Thanksgiving to Christmas, compared with growth rates of 6.6 percent in 2006 and 8.7 percent in 2007.

Scott Silverman, executive director of the online shopping affiliate of the National Retail Federation called shop.org, said that given the size of the Internet retail market, the industry would be hard-pressed to maintain its past growth rates.

Shop.org is projecting that Internet sales will be up 18 percent overall in 2007, compared with about 25 percent in recent years.

Analysts said Internet retailing was so large - projected to be more than $120 billion this year - that it would be difficult to maintain the high growth rates. Indeed, analysts said, the e-commerce engine continues to set a torrid pace, taking shares from brick-and-mortar stores.

The 19 percent growth clip for online sales is about five times the rate of growth for the offline stores; a year ago, the online world was growing about four times more quickly.

Holiday discounts came both from traditional retailers with online stores and from online-only merchants. A primary price-cutting tactic used by online retailers was to offer shipping discounts. This season, 68 percent of retailers offered free upgrades for express shipping, up from 49 percent a year ago, according to shop.org.

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