The Census Bureau of the Department of Commerce reported Friday that it estimates US retail e-commerce sales for the third quarter, adjusted for seasonal variation, came in at 17.5% (+/- 5.8%) versus the same period a year ago. On an adjusted basis, US retail e-commerce sales, as a percent of total quarterly retail sales, have advanced to nearly 6%, up from just 2% at the beginning of 2004 (shown in image below). Both the rapid pace of US retail e-commerce sales expansion and the trend toward more transactions being completed online show no signs of slowing.
Image Source: US Department of Commerce
The positive data follows comScore’s (SCOR) report, released earlier this month, of a 13% increase in US desktop-based retail e-commerce sales for the third quarter of 2013. Though it marked the sixteenth consecutive quarter of positive year-over-year expansion, the pace was a slight deceleration from the 16% year-over-year pace achieved in the previous quarter. US mobile commerce spending, which includes transactions completed on smartphones and tablets, advanced an impressive 26% from the same period a year ago. Mobile continues to grow as a portion of online sales, which continues to grow as a portion of total retail sales. Though we continue to give more weight to the ongoing channel shift to e-commerce over the long haul, a trend that remains firmly intact, comScore’s assessment of the coming holiday shopping season is still worth noting:
Although there was evidence of slightly diminished consumer confidence in Q3, a more optimistic take is that increased outlays on large purchases such as new homes and automobiles may have temporarily squeezed other discretionary consumer spending. That said, the trend could still spell a challenging holiday season for retailers this year – particularly given the highly compressed calendar between Thanksgiving and Christmas, which contains six fewer shopping days than last year and is the shortest shopping season since 2002. Nonetheless, we are confident that the growth rate in online spending will once again far exceed that in bricks and mortar stores, reflecting the ongoing channel shift to e-commerce (Source: comScore).
The holiday shopping season of 2013 will be the most intense in years, and we think a variety of brick-and-mortar retailers will feel significant margin pressure during the period. Promotions that Amazon (AMZN) is running through its ‘Black Friday Deals Week’ will almost certainly add to the pain:
Per Amazon: Black Friday deals are here! You shouldn’t have to stand in a long line to get a great deal. We’ve been searching for the best Black Friday deals everywhere–including Black Friday deals other stores are planning–so we can bring them to you even earlier. These limited-supply deals will go quickly, but we’ll add new ones as frequently as every 10 minutes, every day, during Black Friday Deals Week so you can skip the long lines and still save a bundle.
Best Buy (BBY) is being equally aggressive with its ‘Countdown to Black Friday, Deal Today Gone Tomorrow’ promotions and is offering free shipping on orders $25 and up on its website.
Image Source: Best Buy
Valuentum’s Take
Though the 2013 holiday season will be the most competitive in years, the long-term secular trend toward increased online spending is firmly intact. We think this bodes particularly well for Best Ideas portfolio holdings eBay (EBAY) and Visa (V) through both of their payment platforms. Though we may engage in some modest profit-taking with respect to both holdings in coming weeks, they remain core positions in our Best Ideas portfolio.
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