‘Free Shipping Day’ Marks the Peak of a $30.9 Billion Holiday Online Spending Season to Date

For the first 46 days of the November – December 2011 holiday season, online spending increased 15 percent year-over-year to $30.9 billion, according to comScore, a company that measures digital data.

The most recent work week (Dec. 12-16) saw four individual days surpass $1 billion in online spending, led by Monday, December 12 with $1.13 billion and Friday, December 16 (known by the online retail industry as “Free Shipping Day”) with $1.07 billion, according to the Reston, Va.-based company. Free Shipping Day is, now in its fourth year, is a one-day, online-shopping event when thousands of merchants offer free shipping with delivery by Christmas Eve.

With the heaviest portion of the season over, Cyber Monday appears likely to rank as the heaviest online spending day of the year (at $1.25 billion) for the second consecutive season, said Gian Fulgoni, comScore chairman.

“More than $1 billion in spending on Free Shipping Day put the exclamation point on what will almost certainly be the heaviest week of the online holiday shopping season,” Fulgoni said. “While next week may see another strong day or two at the beginning of the week, it’s clear that we have now reached the crescendo for this season and that spending will begin to slow as we get closer to Christmas, leaving Cyber Monday as the top ranked shopping day for the second year in a row.”

Following a decline in the second week of December, free shipping rebounded during this most recent week, which concluded with Free Shipping Day, according to comScore’s analysis of e-commerce transactions. Each week of the online holiday season-to-date has seen free shipping occur on at least half of all transactions. For the five-day week ending with Free Shipping Day, the percentage of transactions with free shipping reached 56 percent, nearly 4 percentage points higher than the corresponding time period last year.

“Free shipping is undoubtedly one of the most important incentives for consumers and has become a key driver of online buying activity over the past few years,” Fulgoni said. “This season has seen a continuation of the trend where an increasing percentage of transactions involve free shipping, as more consumers demand it and more retailers provide it. During the week of Thanksgiving and Cyber Week we saw at least 3 in 5 transactions use free shipping, significantly higher rates than we’ve ever previously observed.”

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Final Results: Holiday Online Spending Hits a Record $37.2 billion

Retail e-commerce spending for the November – December 2011 holiday season (November 1 - December 31) increased 15 percent, year-over-year, to $37.2 billion, an all-time record for the season, according to comScore, a company that measures digital data and provides digital business analytics.

Ten individual spending days surpassed $1 billion in sales, as compared to just one day reaching that mark in 2010, the Reston, Va.-based company said. Cyber Monday (the Monday after Thanksgiving Day, November 28) ranked as the heaviest online spending day of the year at $1.25 billion, the second consecutive year it has ranked first for the season. The second heaviest spending day was Monday, December 5 at $1.17 billion, followed by Monday, December 12 at $1.13 billion. Tuesday, November 29 ($1.11 billion) and Tuesday, December 6 ($1.10 billion).

With the relative newness and growing acceptance of digital e-commerce, it’s common for online sales to exceed the prior year’s results. However, the 2011 holiday season was exceptional by any standard.

“With brick-and-mortar holiday retail estimated to have grown about 4 percent this year, it’s clear that e-commerce continues to gain market share from traditional retail due to the attractiveness of the Internet’s convenience and lower prices,” said Gian Fulgoni, comScore chairman. “Consumers were especially attracted to the deals and discounts available through digital channels—particularly free shipping, which occurred on well over half of transactions this season. Despite their continuing price sensitivity, consumers felt a bit more comfortable opening up their wallets this year, although this appears to have occurred as a result of a decline in the savings rate. Nonetheless, it’s clear that, at least on the basis of top line growth, this was a Merry Christmas for many online retailers. What will remain unknown until retailers report their financial year end results is whether the aggressive pricing and free shipping offers came at the cost of lower margins.”

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Affluent Households Will Increase Luxury Spending by 3%

Jim Taylor

PALM BEACH, Florida — Overall spending on luxury goods and services will rise by 3 percent in 2012 among those the top 10 percent of American households, led by the top 1 percent who will spend 4 to 5 percent more than the prior year, according to a recently released survey. This includes a slight increase in the sales of luxury jewelry and timepieces.

“It’s a very healthy increase and will likely be sustained well into the next year,” Jim Taylor of the Harrison Group said Monday at the American Express Publishing Luxury Summit, held at The Breakers.

For the sixth year, Taylor gave his entertaining talk on the state of the top 10 percent of U.S. households based on income in the Survey of Affluence and Wealth in America report. According to the survey, there are approximately 12 million households in 2012 with at least $100,000 in discretionary income that make up the top 10 percent. The study of 1,268 affluent and wealthy consumers tracks the attitudes, lifestyles, luxury category spending patterns and financial services participation in this demographic. Among its findings:

* The total discretionary luxury consumption market for 2012 will be approximately $375 billion and nearly two thirds of all luxury spending will be consumed the top 12 million families.

* The wealthiest consumers in the U.S. are sitting on approximately $6 trillion in savings that could balloon to $12 trillion by 2014, Taylor said during a sunrise meeting with journalists Tuesday. If the holders of these savings start spending, it could bring about “A capital boon in America the likes of which we’ve never seen.” On average, families in the study save 23 percent of their income, which increases to 34 percent among the one percent.

* The most likely investment for all of this money is real estate beginning in 2014 as it is one of the few places where there are still deals available. “A real estate boom is around the corner because there is nowhere else to put the money,” Taylor told the luxury summit attendees Monday.

* What’s stopping the wealthy from moving their savings is their pessimism about the economy. Among those surveyed, 78 percent believe the U.S. is in a recession and 52 percent believe that it will last for a least another year. “What’s driving these people nuts is the pronouncement that everything is okay,” he said.

* A secondary reason why the wealthiest Americans are saving is because they feel their success is under siege from the Occupy Wall Street movement and the political debate over the fairness of the increasing gap between the wealthy and the middle class. About 20 percent of consumers with discretionary incomes at $250,000 and about 25 percent of the one percent are worried about being disparaged for being financially successful. “It is clear that American entrepreneurs and successful people are nervous about the break out of an extraordinary kind of antagonistic class warfare as the election season unfolds,” Taylor said.

* Surprisingly, 75 percent of those surveyed favor a significant tax increase on income but not on their assets, Taylor said.

* Philanthropic spending is closer to home and family than it has been in the past: church, school, healthcare. “There’s a growing abandonment of environmental causes and social causes,” Taylor said. “We are seeing an inclination not to share.”

This complex picture of wealthy households affects how these households view luxury goods and services.

For example, the study is documenting a shift away from value-driven spending with more than 30 percent of respondents skeptical of the value of consumption itself. The survey has defined this as “The Worth Movement.”

“These families can be heard to say about a trip, a dress, an automobile, a piece of jewelry, or even an investment, ‘I know I spent more than I had to but it was worth it,” said Cara David, Senior VP at American Express Publishing, which co-produced the report.

Fundamental worth oriented shoppers (about 19 percent of respondents) are characterized by the following:

* A preference for stores that are elegant (78 percent);
* A desire for the experience of purchasing to be as pleasant as the experience of owning (83%);
* A greater likelihood of having close relationships with a select group of salespersons (36 percent); and
* A belief that it is worth paying more for the very best quality automobiles (76 percent), hotels (73 percent) and jewelry (63 percent).

“What people want is a company that shares their value system and this value system is expressed in the transaction, design and advertising and to the extent that it remains consistent is fluid over time,” Taylor said. “What we’re advocating is you got to find out what your brand means to you.… It’s not enough just to be different.”

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Survey: U.S. Luxury Spending Down 27%

Pam Danziger

Luxury consumers in the U.S. cut back their level of luxury spending during the second quarter of 2012 by 8.2 percent from first quarter, according to a recent survey. The decline in spending was even more pronounced when comparing year-over-year, down 26.9 percent.

The Luxury Consumption Index for the April to June period shows that “luxury consumers got nervous about their financial status,” said Pam Danziger, president of Unity Marketing, which runs the quarterly survey of affluent Americans.

“The up and down trajectory of the LCI that we've seen over the past year measures continued uncertainty among affluent consumers who make up the heavy lifters in the overall consumer economy,” Danziger, said. “Looking back at over the past three years, we find that the luxury consumers, particularly the ‘ultra-affluents’ (the top 2 percent of U.S. households), unleashed pent up demand for luxury indulgences during 2010, but since then affluent confidence, and their willingness to spend on luxury, has been constrained.”

Danziger said that spending among ultra-affluents dropped to the lowest level seen since 2008. In addition, nearly one-third of the affluents surveyed believe the country is worse off now than it was three months ago.

“If this key consumer segment for the super-premium luxury brands continues apace, many luxury marketers will have a hard time meeting high comparable sales goals this year,”  Danziger said. For the next six months, Unity Marketing continues to expect challenges for luxury brands to encourage the affluent to trade up to their high-end brands, especially the lower-income HENRYs (High Earners Not Rich Yet with HHI $100,000-$249,900), who have taken a hit to their wealth and earning potential as a result of the recession and ongoing weakness in the U.S. economy.”

Danziger points to the recent quarterly release by leather goods maker Coach Inc as an example of a brand that seriously overestimated HENRY customers' willingness to spend. Coach tried to eliminate coupon promotions tied directly to its discount outlets, which are the company's biggest source of revenue, and which attract HENRY customers looking to stretch their dollars. This misstep, she said, led to Coach reporting weak same store sales growth in the quarter ending June 30, which then caused its stock to have its worst day on Wall Street since the 9/11 attacks.

“The number of people willing and able to pay a premium for luxury brands, like Coach, is getting smaller as this weak economy continues,” she said.

Unity Marketing has been calculating the LCI since 2004 based upon five key measures of luxury consumer confidence including their expectations for future spending on luxury, their personal financial conditions and their overall assessment of the economy as a whole, in surveys conducted every three months among over 1,200 affluent luxury consumers.

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Consumers Online Spending Up 15% in Q3

Online retail spending for the third quarter increased 15 percent year-over-year to $41.9 billion, representing the 12th consecutive quarter of positive year-over-year growth and eighth consecutive quarter of double-digit growth, according to comScore, Inc.

Gian Fulgoni, chairman of the Reston, Va.-based company that specializes in measuring digital data, said the numbers are consistent with the prior quarter and confirm “the strength in the e-commerce sector, despite a few negative headwinds in the macroeconomic environment during the quarter. Such performance offers some optimism as we approach the holiday season, especially given recent improvements in consumer sentiment.”

He added, “With the housing market beginning to show signs of recovery in addition to increasing–if still underwhelming–job growth, there appears to be strong enough footing to support a very healthy online holiday shopping season.”

Other highlights from comScore’s Q3 2012 U.S. retail e-commerce sales estimates include:

* The top-performing online product categories, according to the survey were: Digital Content & Subscriptions, Consumer Electronics, Event Tickets, Apparel & Accessories, and Computer Software. Each category grew at least 16 percent year-over-year.

* About 37 percent of U.S. consumers say they have engaged in “showrooming” behavior where they use a smartphone while in a retail store to check prices or to purchase a product online, representing a 5-percent increase in the past two quarters.

* According to the survey, 48 percent of U.S. consumers now rate the economy as “poor” an 8-percentage point improvement vs. the prior quarter and the most pronounced improvement since early 2009.


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Q4 Retail E-Commerce Spending Nears $50 Billion

Online retail spending for the fourth quarter of 2011 increased 14 percent, year-over-year, to $49.7 billion, according to comScore, which measures digital data. This growth rate represents the ninth consecutive quarter of positive year-over-year growth and fifth consecutive quarter of double-digit growth rates. For the entire 2011 year, U.S. retail e-commerce spending reached a record $161.5 billion, a 13-percent increase from 2010.

“The fourth quarter of 2011 capped off what was yet another strong year for online retail, one in which every quarter achieved double-digit increases versus the prior year,” said Gian Fulgoni, comScore chairman. “In the face of continuing uncertainty regarding the U.S. economy, consumers increasingly went online for their shopping needs. Price and convenience continue to be the critical value drivers for e-commerce, and unless those conditions change we can expect to see more channel-shifting to online in 2012 and perhaps even an acceleration in the current growth trend.”

Other highlights from Q4 2011 include:

* The top-performing online product categories were: Digital Content & Subscriptions, Jewelry & Watches, Consumer Electronics, Toys & Hobbies, and Computer Software. Each category grew at least 18 percent vs. year ago.

* Ten individual days in Q4 surpassed $1 billion in online spending, led by Cyber Monday (Nov. 28) at $1.25 billion. Monday, Dec. 5 ranked second at $1.17 billion, followed by Green Monday (Dec. 12) at $1.13 billion.

* 52 percent of e-commerce transactions included free shipping, representing an all-time high. The previous high was Q4 2010 at 49 percent.

* Smartphones and tablets played a growing role in online shopping, with consumes increasingly using smartphones to check prices and product features while physically in a retail store.

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