You Can Do Better Than 9%

We've been told that the Internet is the new frontier for e-commerce. Online stores are booming. Bricks-and-mortar chains are beefing up their dot-com storefronts.

Don't get too excited just yet, though. Market research giant comScore is reporting that e-tail sales grew by a mere 9% during the third quarter when pitted against last year's showing. In fact, it's been more than two years since the last time that retail e-commerce grew faster than 10%.

Put in a more sobering way, China's economy in general is growing faster than online retail.

It's a pathetic sum, and stacked on top of the 2% decline that comScore recorded for last year's third quarter, we're talking about an embarrassing 7% spurt over two years.

I'm not buying it.

When it comes to dedicated e-tailers, the growth appears to be a lot heartier than 9%. Net sales at Amazon.com (Nasdaq: AMZN  ) grew a scorching 39% during those same three months. Overstock.com (Nasdaq: OSTK  ) clocked in with a hearty 27% top-line surge.

Let's see how some of the other stand-alone online retailers are projected to growth their revenue when they report in the coming days.

  • drugstore.com (Nasdaq: DSCM  ) : 12.4%
  • Blue Nile (Nasdaq: NILE  ) : 7.6%
  • Vitacost.com (Nasdaq: VITC  ) : 14.3%
  • PC Mall (Nasdaq: MALL  ) : 16.3%
  • PC Connection (Nasdaq: PCCC  ) : 32.3%

Outside of Blue Nile -- which naturally may be held back because of its high-end jewelry emphasis -- it seems as if everybody's growing faster than 9%. PC Mall and PC Connection also have mail-order roots which may actually be sandbagging their dot-com growth.

So what's going on here? Are the online pure plays simply growing faster than their privately held peers? Are bricks-and-mortar chains not putting enough muscle behind their online endeavors?

For investors, the real takeaway here is that comScore's data can be safely discarded. The real stars of e-tail are growing a lot faster than the market.

With drugstore.com reporting tonight and the others to follow, is it smart to buy into the e-tail stocks ahead of this year's holiday season? Share your thoughts in the comment box below.

Blue Nile is a Motley Fool Rule Breakers pick. Amazon.com is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz has been shopping online since the early 1990s, even before many of these chains were around. 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.


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  • Report this Comment On November 02, 2010, at 11:26 AM, pinstripes1958 wrote:

    what happened to your continuous bashing of VITC?

  • Report this Comment On November 02, 2010, at 12:36 PM, stuckinamobile wrote:

    It has been replaced with it constant pumping of Blue NILE. Give it up Fool and sell your shares. Pumping this shallow company is getting old. Please stop.

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