e-Commerce Takes A Hit From Falling Economy, But Remains Brisk

e-Commerce sales in the fourth quarter of 2008 represented 3.4% of all retail sales, the Census Bureau said.

The Census Bureau noted only the slightest increase in the percentage of e-commerce sales of all retail sales.

Total e-commerce sales for 2008 were estimated at $133.6 billion, an increase of 4.6% ('1.8%) from 2007. Total retail sales in 2008 decreased 0.6% ('0.4%) from 2007. e-Commerce sales in 2008 accounted for 3.3% of total sales, with e-commerce accounting for 3.2% of all sales in 2007.

From year to year, estimated fourth-quarter e-commerce sales were down 5.5% (+2.1%) from the fourth quarter of 2007, and overall retail estimated sales for the fourth quarter were down 9.1% (+0.5%) from the same quarter in 2007, according to the Census Bureau.

The figures were adjusted for seasonal variation, but not for price changes, which the Census Bureau does to filter out variations that can dilute the accuracy of its sales estimates. Total sales estimates are also adjusted for trading-day differences and moving holidays, the Bureau notes.

Without adjustment, the 2008 fourth-quarter figures look like this:

• Estimated retail e-commerce sales: $37.1 billion;
• Estimated e-commerce sales increased 17.3% ('2.1%) from the third quarter of 2008;
• Estimated fourth-quarter e-commerce decreased 4.9% ('2.1%) from the fourth quarter of 2007, while total retail sales decreased 8.6 ('0.5%) in the same period.

e-Commerce sales in the fourth quarter of 2008 accounted for 3.8% of all sales.

The Census Bureau said that its statisticians would revise the 2008 fourth-quarter e-commerce and general retail estimates for release on May 15, which is when the Bureau will also release estimates for the first quarter of this year.

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.

Latest e-Commerce Total
And Sector Report

Last 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, EDI.

Sector Activity

The report that the Census Bureau released last 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, or $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 the 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 questionnaires included e-commerce queries, along with questions about employment, payroll, shipment value, consumed-material costs, and capital expenditures.

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 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.

About 2.5 million firms populate the retail trade universe used.

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The battered economy appears to have caught up with e-commerce, by the way the U.S. Census Bureau's estimated retail sales for the fourth quarter of 2008 look.

The government said last month that its estimate of e-commerce retail sales for October through December of 2008 came in at $31.9 billion, a dip of 5.7% (+2.1%) from the third quarter of 2008, when estimated e-commerce sales were $34.4 billion, a modest increase of .03% from the second quarter. It was a steep quarter-to-quarter drop, but still a healthy showing for spending at a time when consumers are pulling their belts tighter and, as a result, going online to shop, in some cases, for bargains. e-Commerce counsel have been busy advising clients who have been scrambling to accommodate some uptick in activity, e-commerce experts and economists say.

Total estimated retail sales for the fourth quarter were $938.1 billion ' down 7.8% (+0.4%) from the third quarter, when total estimated retail sales topped $1 trillion.

e-Commerce sales in the fourth quarter of 2008 represented 3.4% of all retail sales, the Census Bureau said.

The Census Bureau noted only the slightest increase in the percentage of e-commerce sales of all retail sales.

Total e-commerce sales for 2008 were estimated at $133.6 billion, an increase of 4.6% ('1.8%) from 2007. Total retail sales in 2008 decreased 0.6% ('0.4%) from 2007. e-Commerce sales in 2008 accounted for 3.3% of total sales, with e-commerce accounting for 3.2% of all sales in 2007.

From year to year, estimated fourth-quarter e-commerce sales were down 5.5% (+2.1%) from the fourth quarter of 2007, and overall retail estimated sales for the fourth quarter were down 9.1% (+0.5%) from the same quarter in 2007, according to the Census Bureau.

The figures were adjusted for seasonal variation, but not for price changes, which the Census Bureau does to filter out variations that can dilute the accuracy of its sales estimates. Total sales estimates are also adjusted for trading-day differences and moving holidays, the Bureau notes.

Without adjustment, the 2008 fourth-quarter figures look like this:

• Estimated retail e-commerce sales: $37.1 billion;
• Estimated e-commerce sales increased 17.3% ('2.1%) from the third quarter of 2008;
• Estimated fourth-quarter e-commerce decreased 4.9% ('2.1%) from the fourth quarter of 2007, while total retail sales decreased 8.6 ('0.5%) in the same period.

e-Commerce sales in the fourth quarter of 2008 accounted for 3.8% of all sales.

The Census Bureau said that its statisticians would revise the 2008 fourth-quarter e-commerce and general retail estimates for release on May 15, which is when the Bureau will also release estimates for the first quarter of this year.

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.

Latest e-Commerce Total
And Sector Report

Last 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, EDI.

Sector Activity

The report that the Census Bureau released last 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, or $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 the 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 questionnaires included e-commerce queries, along with questions about employment, payroll, shipment value, consumed-material costs, and capital expenditures.

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 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.

About 2.5 million firms populate the retail trade universe used.

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