E-Tail Is Dead, Dude

The economy is doing so poorly that even e-tail is flopping around like a goldfish out of its tank.

Market watcher comScore (Nasdaq: SCOR  ) is projecting that nontravel e-commerce spending clocked in at $24.7 billion from Nov. 1 through Dec. 21 this year, a 1% dip from the nearly $25 billion in Internet shopping during the same 51 days last year. It's a dramatic turnaround from the 9% gain that comScore reported during the first 10 months of the year.

Don't hold out for salvation beyond that, as Web-based retail dies beyond gift-card purchases once conceivable shipping deadlines pass.

This is not good. The malls have been understandably empty given the soft economy, but weren't consumers supposed to flock online to find huge deals?

One can't take a third-party source like comScore as gospel, but the cracks were already starting to show. Online jeweler Blue Nile (Nasdaq: NILE  ) has been posting stateside year-over-year sales declines all year long, but it apparently has company this season.

Analysts see companies like online auctioneer eBay (Nasdaq: EBAY  ) and closeout specialist Overstock.com (Nasdaq: OSTK  ) posting lower revenue this quarter. Market bellwether Amazon.com (Nasdaq: AMZN  ) is bucking the trend, for now. Analysts see revenue climbing by a refreshing 14% this quarter.

Amazon should outperform the industry. Its wildly successful Prime membership program that offers expedited shipping is a viral winner. Once you pay Amazon $79 for a year of free two-day shipping in the Prime program, it encourages shoppers to lean on the site whenever a purchase decision is being made.

This doesn't mean that Amazon is a money-printing mint. It issued holiday quarter guidance of 6% to 23% in revenue growth for the current quarter. That doesn't sound too shabby, but the midpoint of its profit guidance calls for a dip in operating profitability. Oh, and that guidance was issued more than two months ago. The economy certainly hasn't improved since then.

Is this the end of the line for e-tail? Is the migration over? Real-world retail is also doing horrendously poorly, so let's wait until the general retail economy bounces back before burying the e-commerce miracle to rest.

Other headlines to rock out to:

Blue Nile is a former Motley Fool Hidden Gems selection. Overstock.com and Blue Nile are Motley Fool Rule Breakers selections. eBay and Amazon.com are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz has been shopping online for about as long as Amazon.com has been in business. He does not own shares in any of the stocks in this article. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (9) | Recommend This Article (6)

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  • Report this Comment On December 26, 2008, at 11:39 AM, dibble905 wrote:

    E-tail is Dead? After a 1% drop year over year? A dramatic turnaround from the 9% gain from the beginning of the year?

    Please tell me you were expecting that.

    The way the markets are functioning, they are discounting significantly lower sales than a "1% drop", essentially wiping out any return on equity over the next 5 years.

    Despite the poor numbers, fear mongering is causing a significant overshoot of what is happening. Headlines like this don't help the everyday investor either. I am sure the majority of people are rational and willing to hold through these tough times, but because portfolios are marked-to-market, as long as there are more sellers (i.e. panic sellers) than buyers, stock prices will continue to fall.

  • Report this Comment On December 26, 2008, at 12:19 PM, Patricia013 wrote:

    Your article doesn't even merit a comment.

  • Report this Comment On December 26, 2008, at 12:27 PM, BuhByeeBay wrote:

    As long as sites such eBay continually suck dry the merchants on the site, e-commerce is a walking corpse.

    When nearly 50% of the asking price of items sold on these sites, goes to pay Peter, Paul, and Mary, company's such as WalMart will continue to gain ground and eventually crush all e-commerce.

    All hopes of real discount shopping on eBay is mute. The seller can compete only so much before going into the red. To the tune of little or no profit all all. No one can stay in business under draconian polices. The only one getting rich here is eBay.

    But not for long...

    eBay is NOT the place for deals anymore. It is an over bloated greedy pig whose fees are killing off all hopes for finding bargains for buyers.

    In fact, Walmart has just announce iPhone availability beginning as early as this coming Sunday.

    http://www.appleinsider.com/articles/08/12/26/wal_mart_annou...

    eBay's greed has had a negative effect on all online sales. Here's what the buyer can expect to pay for when making a purchase on eBay.

    (Remember, the seller cannot absorb these fees, these are naturally passed onto the buyer):

    The Sellers Store Fees

    The Sellers Listing Fees

    The Sellers Final Value Fees

    The Sellers PayPal Fees

    The Sellers Currency Conversion Fees

    The Sellers Shipping Fees

    The Sellers Return Shipping Fees (if item is defective or broken)

    Tax (if applicable)

    As you can see, the seller is unable to give the buyers any kind of "deal" at any time because these greedy companies have their fingers in every pocket of the merchant (sometimes even an orifice or two).

    This is why WalMart came out ahead this shopping season. Buyers would rather wisely take their money and purchase at a real bargain prices. You have to be able to offer something "better" to convert window shoppers into buyers.

    eBay offers nothing but high prices, along with the shipping company's (who by the way are raising costs yet again this January!)

    Yep. The bubble has definitely popped!

  • Report this Comment On December 26, 2008, at 2:29 PM, bayrefugees wrote:

    Yup....exactly what the fine poster above me said!!!

    Well put BuhByeeBay!!

  • Report this Comment On December 26, 2008, at 4:22 PM, ocdgirl2000 wrote:

    Is there anyone aware of what kind of accellerated profits the thrift store circuit is generating? ....I thought not.

    "used" and "recycled" is where it's at. People are tired of supporting "throw-away" chinese imports. Vintage quality is here to stay! Too bad ebay blew it off!

  • Report this Comment On December 27, 2008, at 10:40 AM, Maggied45 wrote:

    As a mall owner and online merchant of antiques and collectibles, I feel that the current economy along with people striving to be more "green," will only help our sales at Collectors Online Mall http://collectorsonlinemall.com

    Most of our items are vintage and used - old toys, vintage jewelry, glassware, kitchen appliances, and things of that nature. People are bound to seek these things because they will save them money, and over time will increase in value.

  • Report this Comment On December 28, 2008, at 10:37 AM, danbuch wrote:

    Headline writing like this is the media's attempt to drive eyeballs to its site so they can save their own rear ends as online advertising is drying up. Calling etail dead is a complete oversimplification of the reality that 1% down is truly great considering that this is the worst consumer lead recession in anyone who is alive lifetime.

    Fool: Get a grip, because you're sounding like well, a fool.

  • Report this Comment On December 28, 2008, at 10:38 AM, danbuch wrote:

    Patricia - You're funny. I still buy from you on eBay!

  • Report this Comment On January 05, 2009, at 3:43 AM, falang1 wrote:

    "This is not good. The malls have been understandably empty given the soft economy, but weren't consumers supposed to flock online to find huge deals?"

    If e-tail only dipped 1% this Christmas season when everything was hammered, that means consumers WERE flocking online. Did we really expect a 25% gain?

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