Third Quarter e-Commerce Report

The federal government's estimated third-quarter bricks-and-mortar retail and e-commerce retail spending are in.

And there's good news and there's bad news.

The bad news first: The U.S. Census Bureau's monthly advance retail sales report for October showed a whopping 2.8% decrease from the previous month ' a month-to-month record in adjusted figures since the Bureau began reporting such data in 1954. That slide was a record, with even e-commerce taking a hit in the month-to-month measure of activity in the same period ' September to October of this year.

There's more bad news: Total e-commerce activity, not adjusted for seasonal variation or trading-day or moving holiday differences, was down 2.8% from the second quarter. That brought non-adjusted e-commerce estimated spending in at $31.6 billion.

Now the good news: e-Commerce still gained, as consumers, battered by in-store and gas-station prices and suffering from the push-down of the recent credit and financial-services crises, flocked again to Web sites ' pure-play and those operated by bricks-and-mortar retailers ' looking for bargains and lower prices than inventory-carrying retail structures could offer. And, financial experts say that the continued ' albeit slower-than-usual ' growth of e-commerce also was nudged along by business-to-business activity in sectors not as significantly affected by the money crunch, such as materials-acquisitions for manufacturers of electronics and other products that, although selling more slowly, are still moving.

Consider: The Census Bureau said on Nov. 19 that it estimated from its retail surveys that e-commerce sales for the third quarter, adjusted for seasonal variation, but not for price changes, totaled $34.4 billion ' an increase of 0.3% ('1.3%) from the second quarter. From the third quarter of last year, e-commerce sales this third quarter were up by 5.7%, while total estimated retail sales for the third quarter were up 0.3% from the third quarter of 2007.

Total retail estimated sales for the third quarter were $1.018.8 billion ' a decrease of 1.4% from the second quarter.

e-Commerce accounted for 3.4% of third-quarter sales, the Census Bureau said. Unadjusted for seasonal variations, and day-trading and holidays, e-commerce accounted for 3.1% of all retails sales.

Defining e-Commerce

The Census Bureau classifies e-commerce sales as any involving goods and services for which a buyer places an order, or for which price and terms of sale are negotiated, over the Internet, an extranet, an electronic data interchange (“EDI”) network (this is the leading method), e-mail or other online system. Payment needn't be made online for the transaction to count as e-commerce.

Information from the Census Bureau's Web site, with some interpretation and with background on the Bureau's survey methodology and history, follows.

The Bureau says it will release 2008 fourth-quarter data on Feb. 17, 2009.

Where Do e-Commerce and
e-Commerce Counsel Stand?

e-Commerce counsel contacted for input to this article saw good and bad for e-commerce lawyers, but mostly good. Experts saw work for in-house and outside counsel rising with the nation's generally falling financial fortunes.

Several key predictions in the more-work-for-lawyers scenario emerged; for instance, that:

• In general, e-commerce operations will increase vigilance in monitoring and pursuing intellectual-property infringement.
• Specifically, counsel must be on the watch for cybersquatting and typosquatting as competitors step up activity to outsell and undersell one another.
• Purchasing, expansion, and use of fraud-detection, antitheft and misappropriation-alert software will increase.
• Usurping of domain names and trademarks, including secondary marks and variations of domain names that companies own as a hedge against typosquatting, will rise, along with counsels' work fighting and correcting these abuses.
• Use of the Uniform Resolution Dispute Policy (“URDP”), take-down-notice provisions of the Digital Millennium Copyright Act (“DMCA”) ' “with all its flaws,” as one respondent put it ' and the Anticybersquatting Consumer Protection Act (“ACPA”) will increase as companies direct counsel to guard online and other assets.

But some attorneys say that the rough economic road could mean furloughs for in-house counsel, and less work for outside counsel, as even e-commerce enterprises scramble to survive the wilting winds from Wall Street.

Keeping Wolves at Bay

“Economic troubles tend to stoke the impulse to misappropriate,” Stephen J. Meyers of Woodcock Washburn in Philadelphia says. “There will be an increasing pace of unauthorized adoption of domain names. Copying and hi-jacking the copyrighted look and feel of a Web site will also become more prevalent.”

And these encroachments ' while never acceptable ' are particular grievances to companies when consumer spending sputters.

“Where previously intellectual property owners might have been lax in pursuing e-malefactors, the economic slowdown will seismically change that complacency,” Meyers says. “Cybersquatters, typosquatters and other intellectual-property predators will instead be pursued by IP owners with a Javert-like intensity.”

Meyers says that pure-play e-commerce firms and bricks-and-mortar establishments with high-profile, well entrenched, e-commerce presences will likely be in the same shipment container as far as predatory encroachments goes.

DLA Piper partner J.T. Westermeier is similarly pessimistic ' realistically so ' about predatory behavior in the downturn.

“I expect identity theft and fraud will increase, especially in connection with e-commerce transactions,” Westermeier, in the firm's Reston, VA office, says. “e-Commerce retailers and shoppers need to be wary of e-commerce scams. By all reports, phishing is on the rise. Good information security practices need to be emphasized during these adverse economic conditions.”

Westermeier also had the following to say about what e-commerce companies should expect, and should prepare to address, while the economy limps:

The Federal Trade Commission's Mail and Telephone Order Merchandise Rule applies to e-commerce sales. The Rule requires companies to notify consumers if an order cannot be shipped on time. With the bad economy I expect there will be an increase in e-commerce companies, shippers and fulfillment companies declaring bankruptcy and otherwise experiencing performance problems that will make deliveries less certain. Delays and out-of-stock situations will rise. e-Commerce companies need to take these risks and compliance with the Rule into consideration during these bad economic times.

Quite possibly more work for counsel.

Some Hits, Some Heartache and Some Horizons

Olivera Medenica, a partner in New York City's Wahab and Medenica, sees some woes for e-commerce firms, and their counsel.

“The biggest economic woe is that as (many of) these companies are downsizing, they are letting go of their in-house counsel and other positions, and becoming leaner,” Medenica says. “Although they may not shut down entirely, I think they are reverting to their 'founding' days, when there was maybe just a handful of employees and the founders, and sometimes even just the founders of the company.”

And financing may be tougher to come by, she notes. But what goes around comes around, and the visit is sometimes welcome: Medenica sees a very likely greater use of technology among out-of-work counsel and out-on-the-streets e-commerce workers, or those whose workload and billables may be down because of the economy.

“Although there may be less financing or advertising revenue, the interest in the technology might still very much be there from the public, especially in the social-media context,” she says. “And, I would wager, it is even more popular as users faced with financial difficulties seek to connect with others, whether for professional-networking reasons, or simply for social consolation and entertainment.”

On both sides of the financial fence, the grass isn't as green as it was a year ago, but the networking-via-technology, or just plain, old-fashioned phone calling or flesh-pressing, may help in those now-brownish patches, too, Medenica suggests.

“Some companies will be hit harder than others, especially those with convertible debt where there is no round of financing available and the debt becomes due, often with significant interest,” Medenica explains. “These companies can either try to negotiate a better deal with their investors-debtors or will have to fold entirely. Raising funds from multiple investors or through venture capital is quite difficult at this time; perhaps in the middle of next year it might get a little better, but it's not impossible to raise funds. I have seen angel investors, although in lower numbers, still invest significant sums of monies.”

Strange ' Serendipity in
Some Sectors

In a generally odd, but not-so-strange-to-e-commerce proof of the maxim that one person's (or company's) misfortune is another one's windfall, some e-commerce counsel and business analysts see a strong chance that technology companies ' and some doing e-commerce ' will actually see increased business during these days that have feathers on eagles on quarters rumpled.

“On the operational side, open-source software, as well as cloud computing, will continue to grow even as companies tighten their belts,” Woodcock Washburn's Meyers says. “The economic entrenchment will continue to adversely affect Web sites such as Google that depend on advertising for their revenues. In contrast, other forms of e-commerce, such as eBay, will flourish in an environment in which the demand for discount merchandise will likely exceed any level seen since the advent of the personal computer.

“As intellectual property comes to play a greater role in the health of e-commerce businesses, in-house and outside counsel will also need to place a greater emphasis on early detection of infringements. Watch services and Web-monitoring services will play a major role in that effort.”

And while for some e-commerce ventures the stagnating economy poses new challenges, for others it's more of the same struggle or sojourn for survival or supremacy to which they're accustomed. Principals of those enterprises, like eBay itself and independent eBay auctioneers, may find real business benefits in the nation's economic troubles.

“A lower cost of doing business will allow them to be the low-cost producers,” says Jonathan Bick, adjunct professor of Internet law at Pace and Rutgers law schools, of counsel to WolfBlock in Roseland, NJ, and author of 101 Things You Need To Know About Internet Law. “As consumers seek to minimize their expenditures, e-commerce providers will be better able to offer lower cost on desired goods and services and a lower-cost way of attaining them (electronically, rather than in person ' usually by car). In short, the economic downturn should provide a boon to e-commerce vendors.”

The Census Bureau
e-Commerce Rundown

In mid-spring, the Census Bureau released its E-commerce 2006 report. The Bureau's compilations of e-commerce activity typically lags a year after the reported year is over so that data can be analyzed, and a report, with accurate, meaningful statistics, can be prepared and released.

The report had good news for the general e-commerce sector, and for particular sectors, such as law, for 2006.

Overall, e-commerce grew faster than all economic activity in the four major sectors the Bureau's E-stats report covers:

• Manufacturing;
• Merchant wholesaling;
• Retailing; and
• Selected service industries.

Even so, the change in each sector from traditional to e-supported shipments, sales or revenues remained gradual.

Once again, the business-to-business (“B2B”) sector (legal services for purposes of e-Commerce Law & Strategy coverage fall into this category) ' which is manufacturing and merchant wholesaling in the Census Bureau's report ' led e-commerce, with 93% of all activity.

Total e-commerce transactions in 2006 came to nearly $107 billion, the Bureau says.

Also again, manufacturers and merchant wholesalers were the heaviest users of e-commerce, and manufacturers raised the pace at which they use e-means more quickly than did retailers or selected service businesses.

And from among merchant wholesalers comes indication that B2B e-commerce is rooted in, and mostly done by, electronic data interchange (“EDI”).

Sector Activity

The report that the Census Bureau released in May (for 2006) supersedes the previous report, highlights of which e-Commerce Law & Strategy has carried, sometimes with sector-specific analysis, for some time.

Data used in the report comes from four surveys of about 137,700 manufacturers, wholesalers, service businesses and retailers.

In 2006, the sector leader, manufacturing, racked up e-commerce totaling 31.2% (read that as $1.568 billion) of all shipments. The Bureau noted that the total is a consecutive increase over five previous years.

Merchant wholesalers, an aegis under which the Census Bureau reports manufacturing sales branches and offices (“MSBOs”), was ranked number two. This sector took 20.6% of e-commerce, of $1.148 billion of all sales.

The Retail Sector

As for retailers, e-commerce sales increased in that sector by 22%, but remained relatively low as a share of total retail sales for 2006 ' at 2.7%, or around $107 billion; in 2005, the e-commerce total was $87 billion, or 2.4% of all retail sales.

In retail, more than 90% of e-sales came from non-store retailers, and motor vehicle and parts dealers. The tally there came to $78 billion for non-store retailers (73%), and $20 billion for motor vehicles and parts dealers (19%).

Where were the buys? Nearly all e-sales for non-store retail came from Internet shopping or the mail-order industry ' a group that includes catalog and mail-order houses, many of those selling through several channels; from pure-play retailers ' those selling solely on the Internet; and from the e-tail operations of traditional bricks-and-mortar retailers but that are operating as separate units and don't sell motor vehicles on the Net.

In the e-shopping and mail-order business, e-sales leading categories were:

• Clothing and clothing Accessories (along with footwear): $12 billion;
• Other merchandise: $11 billion; and
• Computer hardware: $9 billion.

As for percentage of online sales, the categories and numbers came out like this:

• Music and videos: 71%; and
• Electronics and appliances: 69%.

The Census Bureau adds that online sales accounted for 39% or more of sales in all but one of the 13 published merchandise lines.

For electronic shopping and mail-order houses segment, 39 % of 2006 sales were “e.”

In selected service industries, e-commerce sales were $114 billion, up 14.9% from 2005 ' or 1.8% of all sales for this sector. In 2005, e-commerce sales here were $99 billion ' 1.7% of the whole take.

Manufacturing Data Rundown

Manufacturing shipment and e-shipment estimates for the report were taken from the Census Bureau's 2006 Annual Survey of Manufacturers (“ASM”). The Bureau says that the “manufacturing universe” comprises about 345,000 plants.

ASM data is gathered yearly from a more-than-50,000-manufacturing-plant probability sample that have five or more employees. Plants with fewer than five employees are subject to estimates from administrative sources, the Bureau notes.

ASM consists of activities at separate, individual plants, rather than a whole company.

ASM questionnaires included e-commerce queries, along with questions about employment, payroll, shipment value, consumed-material costs, and capital expenditures.

Shipment estimates for NAICS (“North American Industrial Classification System”) subsectors were calculated by summing reported and inputed plant data (inputed data came from non-reporting plants, based on known information).

Data on the Other Sectors

Information on sectors other than manufacturing come from the Census Bureau's Annual Wholesale Trade Survey (“AWTS”), Service Annual Survey (“SAS”), and Annual Retail Trade Survey (“ARTS”).

AWTS accounts for economic activity among merchant wholesale firms that have employees who are paid, including manufacturers' sales branches and offices ' MSBOs. Merchant wholesale firms take title to goods they sell. The Bureau requests feedback yearly from about 8,700 merchant wholesale firms, including 1,200 MSBOs. Weighted data from this input is weighted against about 405,000 merchant wholesale establishments, 19,000 of them MSBOs.

The SAS shows activity of firms in nine service-related sectors:

• Transportation and warehousing;
• Information;
• Finance and insurance;
• Real estate, and rental and leasing;
• Professional, scientific, and technical services;
• Administrative, and support and waste management and remediation services;
• Health care and social assistance;
• Arts, entertainment and recreation; and
• Other services.

About 58,000 of 3 million companies with paid employees report information.

ARTS measures economic activity of all retailers with and without paid employees, from about 21,000 firms with paid employees; sales by non-paid employee companies are estimated through administrative records.

About 2.5 million firms populate the retail trade universe used.

[IMGCAP(1)]

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Michael Lear-Olimpi is Editor-in-Chief of e-Commerce Law & Strategy and owner of Susquehanna Editorial Services, which offers writing, editing and writing-coaching services. Reach him at [email protected].

The federal government's estimated third-quarter bricks-and-mortar retail and e-commerce retail spending are in.

And there's good news and there's bad news.

The bad news first: The U.S. Census Bureau's monthly advance retail sales report for October showed a whopping 2.8% decrease from the previous month ' a month-to-month record in adjusted figures since the Bureau began reporting such data in 1954. That slide was a record, with even e-commerce taking a hit in the month-to-month measure of activity in the same period ' September to October of this year.

There's more bad news: Total e-commerce activity, not adjusted for seasonal variation or trading-day or moving holiday differences, was down 2.8% from the second quarter. That brought non-adjusted e-commerce estimated spending in at $31.6 billion.

Now the good news: e-Commerce still gained, as consumers, battered by in-store and gas-station prices and suffering from the push-down of the recent credit and financial-services crises, flocked again to Web sites ' pure-play and those operated by bricks-and-mortar retailers ' looking for bargains and lower prices than inventory-carrying retail structures could offer. And, financial experts say that the continued ' albeit slower-than-usual ' growth of e-commerce also was nudged along by business-to-business activity in sectors not as significantly affected by the money crunch, such as materials-acquisitions for manufacturers of electronics and other products that, although selling more slowly, are still moving.

Consider: The Census Bureau said on Nov. 19 that it estimated from its retail surveys that e-commerce sales for the third quarter, adjusted for seasonal variation, but not for price changes, totaled $34.4 billion ' an increase of 0.3% ('1.3%) from the second quarter. From the third quarter of last year, e-commerce sales this third quarter were up by 5.7%, while total estimated retail sales for the third quarter were up 0.3% from the third quarter of 2007.

Total retail estimated sales for the third quarter were $1.018.8 billion ' a decrease of 1.4% from the second quarter.

e-Commerce accounted for 3.4% of third-quarter sales, the Census Bureau said. Unadjusted for seasonal variations, and day-trading and holidays, e-commerce accounted for 3.1% of all retails sales.

Defining e-Commerce

The Census Bureau classifies e-commerce sales as any involving goods and services for which a buyer places an order, or for which price and terms of sale are negotiated, over the Internet, an extranet, an electronic data interchange (“EDI”) network (this is the leading method), e-mail or other online system. Payment needn't be made online for the transaction to count as e-commerce.

Information from the Census Bureau's Web site, with some interpretation and with background on the Bureau's survey methodology and history, follows.

The Bureau says it will release 2008 fourth-quarter data on Feb. 17, 2009.

Where Do e-Commerce and
e-Commerce Counsel Stand?

e-Commerce counsel contacted for input to this article saw good and bad for e-commerce lawyers, but mostly good. Experts saw work for in-house and outside counsel rising with the nation's generally falling financial fortunes.

Several key predictions in the more-work-for-lawyers scenario emerged; for instance, that:

• In general, e-commerce operations will increase vigilance in monitoring and pursuing intellectual-property infringement.
• Specifically, counsel must be on the watch for cybersquatting and typosquatting as competitors step up activity to outsell and undersell one another.
• Purchasing, expansion, and use of fraud-detection, antitheft and misappropriation-alert software will increase.
• Usurping of domain names and trademarks, including secondary marks and variations of domain names that companies own as a hedge against typosquatting, will rise, along with counsels' work fighting and correcting these abuses.
• Use of the Uniform Resolution Dispute Policy (“URDP”), take-down-notice provisions of the Digital Millennium Copyright Act (“DMCA”) ' “with all its flaws,” as one respondent put it ' and the Anticybersquatting Consumer Protection Act (“ACPA”) will increase as companies direct counsel to guard online and other assets.

But some attorneys say that the rough economic road could mean furloughs for in-house counsel, and less work for outside counsel, as even e-commerce enterprises scramble to survive the wilting winds from Wall Street.

Keeping Wolves at Bay

“Economic troubles tend to stoke the impulse to misappropriate,” Stephen J. Meyers of Woodcock Washburn in Philadelphia says. “There will be an increasing pace of unauthorized adoption of domain names. Copying and hi-jacking the copyrighted look and feel of a Web site will also become more prevalent.”

And these encroachments ' while never acceptable ' are particular grievances to companies when consumer spending sputters.

“Where previously intellectual property owners might have been lax in pursuing e-malefactors, the economic slowdown will seismically change that complacency,” Meyers says. “Cybersquatters, typosquatters and other intellectual-property predators will instead be pursued by IP owners with a Javert-like intensity.”

Meyers says that pure-play e-commerce firms and bricks-and-mortar establishments with high-profile, well entrenched, e-commerce presences will likely be in the same shipment container as far as predatory encroachments goes.

DLA Piper partner J.T. Westermeier is similarly pessimistic ' realistically so ' about predatory behavior in the downturn.

“I expect identity theft and fraud will increase, especially in connection with e-commerce transactions,” Westermeier, in the firm's Reston, VA office, says. “e-Commerce retailers and shoppers need to be wary of e-commerce scams. By all reports, phishing is on the rise. Good information security practices need to be emphasized during these adverse economic conditions.”

Westermeier also had the following to say about what e-commerce companies should expect, and should prepare to address, while the economy limps:

The Federal Trade Commission's Mail and Telephone Order Merchandise Rule applies to e-commerce sales. The Rule requires companies to notify consumers if an order cannot be shipped on time. With the bad economy I expect there will be an increase in e-commerce companies, shippers and fulfillment companies declaring bankruptcy and otherwise experiencing performance problems that will make deliveries less certain. Delays and out-of-stock situations will rise. e-Commerce companies need to take these risks and compliance with the Rule into consideration during these bad economic times.

Quite possibly more work for counsel.

Some Hits, Some Heartache and Some Horizons

Olivera Medenica, a partner in New York City's Wahab and Medenica, sees some woes for e-commerce firms, and their counsel.

“The biggest economic woe is that as (many of) these companies are downsizing, they are letting go of their in-house counsel and other positions, and becoming leaner,” Medenica says. “Although they may not shut down entirely, I think they are reverting to their 'founding' days, when there was maybe just a handful of employees and the founders, and sometimes even just the founders of the company.”

And financing may be tougher to come by, she notes. But what goes around comes around, and the visit is sometimes welcome: Medenica sees a very likely greater use of technology among out-of-work counsel and out-on-the-streets e-commerce workers, or those whose workload and billables may be down because of the economy.

“Although there may be less financing or advertising revenue, the interest in the technology might still very much be there from the public, especially in the social-media context,” she says. “And, I would wager, it is even more popular as users faced with financial difficulties seek to connect with others, whether for professional-networking reasons, or simply for social consolation and entertainment.”

On both sides of the financial fence, the grass isn't as green as it was a year ago, but the networking-via-technology, or just plain, old-fashioned phone calling or flesh-pressing, may help in those now-brownish patches, too, Medenica suggests.

“Some companies will be hit harder than others, especially those with convertible debt where there is no round of financing available and the debt becomes due, often with significant interest,” Medenica explains. “These companies can either try to negotiate a better deal with their investors-debtors or will have to fold entirely. Raising funds from multiple investors or through venture capital is quite difficult at this time; perhaps in the middle of next year it might get a little better, but it's not impossible to raise funds. I have seen angel investors, although in lower numbers, still invest significant sums of monies.”

Strange ' Serendipity in
Some Sectors

In a generally odd, but not-so-strange-to-e-commerce proof of the maxim that one person's (or company's) misfortune is another one's windfall, some e-commerce counsel and business analysts see a strong chance that technology companies ' and some doing e-commerce ' will actually see increased business during these days that have feathers on eagles on quarters rumpled.

“On the operational side, open-source software, as well as cloud computing, will continue to grow even as companies tighten their belts,” Woodcock Washburn's Meyers says. “The economic entrenchment will continue to adversely affect Web sites such as Google that depend on advertising for their revenues. In contrast, other forms of e-commerce, such as eBay, will flourish in an environment in which the demand for discount merchandise will likely exceed any level seen since the advent of the personal computer.

“As intellectual property comes to play a greater role in the health of e-commerce businesses, in-house and outside counsel will also need to place a greater emphasis on early detection of infringements. Watch services and Web-monitoring services will play a major role in that effort.”

And while for some e-commerce ventures the stagnating economy poses new challenges, for others it's more of the same struggle or sojourn for survival or supremacy to which they're accustomed. Principals of those enterprises, like eBay itself and independent eBay auctioneers, may find real business benefits in the nation's economic troubles.

“A lower cost of doing business will allow them to be the low-cost producers,” says Jonathan Bick, adjunct professor of Internet law at Pace and Rutgers law schools, of counsel to WolfBlock in Roseland, NJ, and author of 101 Things You Need To Know About Internet Law. “As consumers seek to minimize their expenditures, e-commerce providers will be better able to offer lower cost on desired goods and services and a lower-cost way of attaining them (electronically, rather than in person ' usually by car). In short, the economic downturn should provide a boon to e-commerce vendors.”

The Census Bureau
e-Commerce Rundown

In mid-spring, the Census Bureau released its E-commerce 2006 report. The Bureau's compilations of e-commerce activity typically lags a year after the reported year is over so that data can be analyzed, and a report, with accurate, meaningful statistics, can be prepared and released.

The report had good news for the general e-commerce sector, and for particular sectors, such as law, for 2006.

Overall, e-commerce grew faster than all economic activity in the four major sectors the Bureau's E-stats report covers:

• Manufacturing;
• Merchant wholesaling;
• Retailing; and
• Selected service industries.

Even so, the change in each sector from traditional to e-supported shipments, sales or revenues remained gradual.

Once again, the business-to-business (“B2B”) sector (legal services for purposes of e-Commerce Law & Strategy coverage fall into this category) ' which is manufacturing and merchant wholesaling in the Census Bureau's report ' led e-commerce, with 93% of all activity.

Total e-commerce transactions in 2006 came to nearly $107 billion, the Bureau says.

Also again, manufacturers and merchant wholesalers were the heaviest users of e-commerce, and manufacturers raised the pace at which they use e-means more quickly than did retailers or selected service businesses.

And from among merchant wholesalers comes indication that B2B e-commerce is rooted in, and mostly done by, electronic data interchange (“EDI”).

Sector Activity

The report that the Census Bureau released in May (for 2006) supersedes the previous report, highlights of which e-Commerce Law & Strategy has carried, sometimes with sector-specific analysis, for some time.

Data used in the report comes from four surveys of about 137,700 manufacturers, wholesalers, service businesses and retailers.

In 2006, the sector leader, manufacturing, racked up e-commerce totaling 31.2% (read that as $1.568 billion) of all shipments. The Bureau noted that the total is a consecutive increase over five previous years.

Merchant wholesalers, an aegis under which the Census Bureau reports manufacturing sales branches and offices (“MSBOs”), was ranked number two. This sector took 20.6% of e-commerce, of $1.148 billion of all sales.

The Retail Sector

As for retailers, e-commerce sales increased in that sector by 22%, but remained relatively low as a share of total retail sales for 2006 ' at 2.7%, or around $107 billion; in 2005, the e-commerce total was $87 billion, or 2.4% of all retail sales.

In retail, more than 90% of e-sales came from non-store retailers, and motor vehicle and parts dealers. The tally there came to $78 billion for non-store retailers (73%), and $20 billion for motor vehicles and parts dealers (19%).

Where were the buys? Nearly all e-sales for non-store retail came from Internet shopping or the mail-order industry ' a group that includes catalog and mail-order houses, many of those selling through several channels; from pure-play retailers ' those selling solely on the Internet; and from the e-tail operations of traditional bricks-and-mortar retailers but that are operating as separate units and don't sell motor vehicles on the Net.

In the e-shopping and mail-order business, e-sales leading categories were:

• Clothing and clothing Accessories (along with footwear): $12 billion;
• Other merchandise: $11 billion; and
• Computer hardware: $9 billion.

As for percentage of online sales, the categories and numbers came out like this:

• Music and videos: 71%; and
• Electronics and appliances: 69%.

The Census Bureau adds that online sales accounted for 39% or more of sales in all but one of the 13 published merchandise lines.

For electronic shopping and mail-order houses segment, 39 % of 2006 sales were “e.”

In selected service industries, e-commerce sales were $114 billion, up 14.9% from 2005 ' or 1.8% of all sales for this sector. In 2005, e-commerce sales here were $99 billion ' 1.7% of the whole take.

Manufacturing Data Rundown

Manufacturing shipment and e-shipment estimates for the report were taken from the Census Bureau's 2006 Annual Survey of Manufacturers (“ASM”). The Bureau says that the “manufacturing universe” comprises about 345,000 plants.

ASM data is gathered yearly from a more-than-50,000-manufacturing-plant probability sample that have five or more employees. Plants with fewer than five employees are subject to estimates from administrative sources, the Bureau notes.

ASM consists of activities at separate, individual plants, rather than a whole company.

ASM questionnaires included e-commerce queries, along with questions about employment, payroll, shipment value, consumed-material costs, and capital expenditures.

Shipment estimates for NAICS (“North American Industrial Classification System”) subsectors were calculated by summing reported and inputed plant data (inputed data came from non-reporting plants, based on known information).

Data on the Other Sectors

Information on sectors other than manufacturing come from the Census Bureau's Annual Wholesale Trade Survey (“AWTS”), Service Annual Survey (“SAS”), and Annual Retail Trade Survey (“ARTS”).

AWTS accounts for economic activity among merchant wholesale firms that have employees who are paid, including manufacturers' sales branches and offices ' MSBOs. Merchant wholesale firms take title to goods they sell. The Bureau requests feedback yearly from about 8,700 merchant wholesale firms, including 1,200 MSBOs. Weighted data from this input is weighted against about 405,000 merchant wholesale establishments, 19,000 of them MSBOs.

The SAS shows activity of firms in nine service-related sectors:

• Transportation and warehousing;
• Information;
• Finance and insurance;
• Real estate, and rental and leasing;
• Professional, scientific, and technical services;
• Administrative, and support and waste management and remediation services;
• Health care and social assistance;
• Arts, entertainment and recreation; and
• Other services.

About 58,000 of 3 million companies with paid employees report information.

ARTS measures economic activity of all retailers with and without paid employees, from about 21,000 firms with paid employees; sales by non-paid employee companies are estimated through administrative records.

About 2.5 million firms populate the retail trade universe used.

[IMGCAP(1)]

---

Michael Lear-Olimpi is Editor-in-Chief of e-Commerce Law & Strategy and owner of Susquehanna Editorial Services, which offers writing, editing and writing-coaching services. Reach him at [email protected].