Economic data out this week (week beginning Monday 24th November 2008) shows consumers are holding onto their wallets worldwide, increasing pressure on US and European governments to take stronger steps to combat the current credit crunch.

Americans cut disposable spending by 1 percent in October, the biggest drop since the last recession in 2001, while British households slashed expenditures last quarter by the most in 13 years, government agencies revealed this week.

A US Commerce Department report also showed orders for "durable goods" slumped twice as much as forecast - as domestic and foreign (non-US) demand dried up.

The decline in personal spending in the US last month followed a 0.3 percent drop in September. Adjusted for inflation, spending fell 0.5 percent, that is a fifth consecutive month on month decrease.

In the UK, government figures showed consumer spending fell 0.2 percent in September, and as Europe's second-largest economy, suffered a 0.5 percent contraction in the same period, the first decline in 16 years.

"We're going from bad to worse," said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, who accurately forecast the drop in consumer spending in this weeks report. "The recession is deepening."

...however you want to look at these numbers it shows one thing. The credit crunch is really starting to effect the spending habits of consumers.


But What About Holiday Spending Online?

If you are an Internet Marketer reading this article, you want to KNOW about sales online.

US Internet measurement firm comScore found that online shopping was in decline for the first time since it began measuring it in 2001. (comScore has been identified as the fastest growing market research firm in the world.)

In its report this week titled: "comScore Forecasts Flat Growth for 2008 Holiday E-Commerce Spending".

...comScore reported its tracking of holiday season retail e-commerce spending for the first 23 days of the November – December 2008 holiday season, as well as its official spending forecast for the season.

For the holiday season-to-date, $8.2 billion has been spent online, marking a 4-percent decline versus the corresponding days last year.

comScore also forecast flat growth for the upcoming Christmas shopping season and did not rule out further decline!

"Despite the recent reprieve that plummeting gas prices have given American consumers, the depressed and volatile stock market, declining housing prices, inflation and the weak job market all represent dark clouds hanging over their heads this holiday shopping season," said comScore chairman, Gian Fulgoni.

"With consumer confidence low and disposable income tight, the first weeks of November have been very disappointing, with online retail spending declining versus year ago. It's also likely that some budget-conscious consumers are planning to wait to buy until later in the season to take advantage of retailers’ even more aggressive discounting."

...but on a more positive note:

"Assuming the stock market doesn't deteriorate materially during the season and that there is no apocalyptic news of major financial institutions, manufacturers or retailers failing, we should see online spending growth inch back towards positive as we get deeper into the season," said Mr Fulgoni.

...however:

"However, if there is any more significant bad news just over the horizon, all bets are off."

What Consumers Are Saying!

Alongside its reporting of e-commerce spending, comScore is also conducting weekly surveys of approximately 500 consumers to determine attitudes and sentiment in regard to the holiday shopping season.

In the most recent survey, conducted between Friday, November 21 2008 and Monday, November 24, 33 percent of consumers said they had not even begun their holiday shopping yet. They also indicated they intended to cut back on holiday spending in several ways, most notably by:

# Buying fewer gifts (47 percent of respondents)
# Buying less expensive gifts (46 percent of respondents)

Respondents also said they planned to employ the Internet to help cut costs:

# By using free shipping and/or no sales tax offers (39 percent)
# By spending more time researching deals online (37 percent)
# By using online coupons or coupons I receive via email (31 percent)
# By using comparison shopping engines (25 percent)
# By shopping at online auction sites (21 percent)
# By shopping using online classifieds (8 percent)
# By using deal of the day websites (8 percent)

Conclusions?

It would take a brave online marketer to predict what is going to happen over the next 4 weeks of online shopping. But the above figures clearly show that consumers have LESS disposable income to spend at the moment.

However, as the comScore survey shows, Internet Marketers who use tactics such as lower pricing, free shipping and coupons may just have an advantage during this holiday season.

Happy Selling!

Regards

Marc Liron - Microsoft MVP