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Brick and Mortar Sales Plummet, but Online Holds its Ground

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Sales 2008

This might not surprise anyone, but it turns out even the steep price cuts retailers used to entice consumers wasn’t enough to offset the sputtering North American economy. This holiday season – which typically accounts for around 30 to 50 per cent of a retailers total sales, was a bust that rippled across every retail sector. According to preliminary data released by SpendingPulse – a division of MasterCard, total retail sales slipped 2 to 4 per cent. While the electronics sector’s slip of 26.7% sounds substantial, it can’t even hold a torch to luxury item’s such as jewelry which sank almost 35%.

On a more positive note, online retailer Amazon.com said its 2008 holiday sales were its “best ever”. The retailer reportedly received orders for over 6.4 million items. This is good news for Amazon, and helps to back up claims from SpendingPulse’s which showed that more and more, consumers are making the switch to shopping online. Overall online sales declined a meager 2.3 percent from the previous year, however this is in stark contrast to 2007 when e-commerce grew almost 22.4 per cent. With big name brick and mortar retailers such as Circuit City already facing bankruptcy, weak holiday sales might see even more blood shed in the retail sector come January.

The clock is ticking, and the boxing week picture is not yet clear, but it remains to be seen what if anything will put retailers back in the black.   

(Image Credit: Wall Street Journal)

COMMENTS
avatarHow about when you purchase

How about when you purchase an item on the internet but select to make an in-store pickup like what you can do at Wal-Mart and Fry's Electronics? Is this considered an online order and contributes to the lower physical store sales over internet sales?

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avatarI bought a TV from Amazon

I bought a TV from Amazon last year, but I have a feeling I'm in the minority on this. In other words, the reason Amazon's sales held pretty steady is that they make bank on "small ticket" items. Most people still go to a brick & mortar for larger items, and it's the larger items which people aren't buying right now.

 

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avatarI'm Glad

At least people know about it.

       Ever since going to Newegg, I have never bought anything except DVDs and games from Brick-and-Morter. For anything else, I will go online. Quality, price, and the simplicity brings me to it. You may not think it's simple, but it is in my book.

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avatarOnline Not Always Cheaper

There are indeed some folks who claim they make more purchases online because it is cheaper. However, unless you make every single purchase from a mega e-tailer, this is not always the case. You have shipping costs to take into consideration versus cost of driving to brick and mortar.

In additon, if the item you purchased is not to your satisfaction, you have the costs of shipping the item back and forth for exchange. 

Online retailing is convenient and for most people who know exactly what they want, it is a good experience to be able to sit in your chair, make a few clicks, fill in some information and your done. No holiday crowds, no traffic. And if your purchasing either for a cheap shipping rate such as 5 dollars or better yet, completely free... Then it becomes very compelling and I think this is where Amazon is gaining ground. They have many products available and no cost shipping on low dollar orders. 

As for taxes, many states need to go back to the model of an income or property only tax and drop the costs of trying to account for sales taxes or enforcing the collection of. I have lived in two tax free states now, Montana and New Hampshire who do very well without sales taxes. After owning and operating an online retail site in New Hampshire for 3 years, I believe in no sales tax more than ever.

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avatarI wonder what will happen to sales tax?

I think the shift to online shopping will continue.  I already buy almost everything online simply because it will always be cheaper.  I do wonder if eventually we will have to rethink the sales tax model for buying online.  I really like not having to pay taxes on larger items by buying online (I know technically I am supposed to later on my tax forms), but it seems like states are losing a very very large sum from this.

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