e-Commerce Activity Makes Gains, Though Still Down Since Economy Crunch

Preliminary estimated e-commerce sales were 3.5% of all preliminary estimated retail sales in the first quarter, statistically even with the increase in the fourth quarter from the third quarter of last year, which was 3.4%.

e-Commerce as a percentage of all estimated retail sales has never declined in the decade since the Census Bureau began tracking e-tail activity, though quarter-to-quarter activity has occasionally been static, with the longest such stretch occurring last year, when, for the first time, e-commerce retail sales as a percentage of all retail sales was 3.3% from the fourth quarter of 2007 to the second quarter of 2008. It was 3.4% of all sales in the third and fourth quarters last year.

The increases in the first quarter's preliminary estimates, though modest, may well indicate an upswing in consumer confidence, which boosts spending, which boosts production, which boosts economic activity, which boosts e-commerce sales, which boosts the morale and monetary rewards of the battered ranks of attorneys who make business law the crux of their practice. Still, this latest increase in estimated e-commerce activity will hardly mean a stampede of existing or potential clients beating a path to law firms' doors.

“As the number of laid-off lawyers mounts by the week, any sign of continued employment for counsel in today's cash-tight times has to be good news,” Stanley P. Jaskiewicz, a member of Philadelphia's Spector, Gadon & Rosen, e-commerce expert and a member of this newsletter's Board of Editors, says.

A Ray of Light?

But the limping improvement may be a positive cautionary tale.

In February, the Bureau reported the biggest fall in quarterly e-commerce activity ' a descent into negative numbers over the previous quarter, as opposed to a slighter gain percentage-wise over the previous quarter ' since the government began tracking that activity, in 1999.

The Bureau's estimate was that e-commerce activity in the fourth quarter of 2008 (reported in February this year) dipped 6% from the third-quarter baseline ' the steepest decline (and only the third one) on record for the 28 quarters for which the Census Bureau has e-commerce data that compares retail activity from quarter to quarter.

The two previous declines occurred in the third quarter of 2001 (down 0.7%), which saw the terrorist attacks on the World Trade Center and the Pentagon, and the attempted attack on Washington, DC, and in the third quarter last year, in the midst of the lingering credit, business and job-loss crisis (down 1.2%).

And the decrease in preliminary estimated e-commerce activity from the first quarter of 2008 to the first quarter of this year isn't pretty (a reflection of the beating that the U.S. economy took last year): that figure is down 5.4%, with a margin of error of 2.5%, plus or minus. That's a tighter-than-usual error margin, suggesting that, statistically, the down-spiral figures are more accurate than up-tick figures, because volume by absence is generally easier to measure than volume by increase.

It's significant, some e-commerce counsel note, that while the decrease in all estimated retail activity between 2008's first quarter and this year's was a whopping 10.2%, the change was only 1.8% less spending in the first quarter from the fourth quarter. The 2008 to 2009 first-quarter difference for e-commerce saw activity down by 5.4%, while the 2007 to 2008 fourth-quarter difference for e-commerce saw activity down by 5.6%.

For overall 2008 to 2009 estimated retail sales changes, activity was down 9.1% from the fourth quarter of 2007 to the fourth quarter of 2008.

Some Numeric Comparisons

Total retail sales for the first quarter of 2009 were estimated at $909.6 billion, a decrease of 1.8% ('0.4%) from the fourth quarter of 2008, the Census Bureau said.

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

The first quarter of this year was the second time, along with the fourth quarter, that estimated total retail quarterly sales dipped back below $1 trillion, which the Census Bureau's estimates hit for the first time in the fourth quarter of 2007, and then continued for the next two quarters, although with an overall decrease of 0.6% in the first quarter of 2008 and a modest gain of 0.2% in the second quarter of 2008. In the third quarter of 2008, total estimated retail spending fell below $1 trillion, to just below $998.7 billion.

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

Adapting Is Important

But if a sow's ear can be made into a silk purse, perhaps tech-market savvy e-commerce lawyers are the ones who can do it; in fact, maybe they could make more than a purse, spinning their experience into a strengthened armor suit of ensemble e-advisement (and then handle suits, and suits).

“After weathering the dot-com crash, those who did not lose hope in e-possibilities may have a future using what we know about traditional law to sort out the problems inherent in applying it to the constantly developing online world,” Jaskiewicz says.

Not adjusted, the estimated e-commerce first-quarter sales figures look this way:

• $30.2 billion, down 17.7% from the fourth quarter;
• Down 5.7% from the first quarter of 2008; and
• 3.6% of all estimated retail 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.

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, 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.

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.

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.

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Rock-solid numbers on economic activity are tough to come by, but if the U.S. Census Bureau's preliminary estimates of retail e-commerce sales can be considered the closest thing to rock-solid numbers, then the nation's economy may be starting the long recovery economists said would come.

The government's estimate of all retail e-commerce sales for the first quarter ' adjusted for seasonal variation, but not for price changes ' came to $31.7 billion.

That's an increase of 0.7% (+1.1%) from the fourth quarter of last year.

Preliminary estimated e-commerce sales were 3.5% of all preliminary estimated retail sales in the first quarter, statistically even with the increase in the fourth quarter from the third quarter of last year, which was 3.4%.

e-Commerce as a percentage of all estimated retail sales has never declined in the decade since the Census Bureau began tracking e-tail activity, though quarter-to-quarter activity has occasionally been static, with the longest such stretch occurring last year, when, for the first time, e-commerce retail sales as a percentage of all retail sales was 3.3% from the fourth quarter of 2007 to the second quarter of 2008. It was 3.4% of all sales in the third and fourth quarters last year.

The increases in the first quarter's preliminary estimates, though modest, may well indicate an upswing in consumer confidence, which boosts spending, which boosts production, which boosts economic activity, which boosts e-commerce sales, which boosts the morale and monetary rewards of the battered ranks of attorneys who make business law the crux of their practice. Still, this latest increase in estimated e-commerce activity will hardly mean a stampede of existing or potential clients beating a path to law firms' doors.

“As the number of laid-off lawyers mounts by the week, any sign of continued employment for counsel in today's cash-tight times has to be good news,” Stanley P. Jaskiewicz, a member of Philadelphia's Spector, Gadon & Rosen, e-commerce expert and a member of this newsletter's Board of Editors, says.

A Ray of Light?

But the limping improvement may be a positive cautionary tale.

In February, the Bureau reported the biggest fall in quarterly e-commerce activity ' a descent into negative numbers over the previous quarter, as opposed to a slighter gain percentage-wise over the previous quarter ' since the government began tracking that activity, in 1999.

The Bureau's estimate was that e-commerce activity in the fourth quarter of 2008 (reported in February this year) dipped 6% from the third-quarter baseline ' the steepest decline (and only the third one) on record for the 28 quarters for which the Census Bureau has e-commerce data that compares retail activity from quarter to quarter.

The two previous declines occurred in the third quarter of 2001 (down 0.7%), which saw the terrorist attacks on the World Trade Center and the Pentagon, and the attempted attack on Washington, DC, and in the third quarter last year, in the midst of the lingering credit, business and job-loss crisis (down 1.2%).

And the decrease in preliminary estimated e-commerce activity from the first quarter of 2008 to the first quarter of this year isn't pretty (a reflection of the beating that the U.S. economy took last year): that figure is down 5.4%, with a margin of error of 2.5%, plus or minus. That's a tighter-than-usual error margin, suggesting that, statistically, the down-spiral figures are more accurate than up-tick figures, because volume by absence is generally easier to measure than volume by increase.

It's significant, some e-commerce counsel note, that while the decrease in all estimated retail activity between 2008's first quarter and this year's was a whopping 10.2%, the change was only 1.8% less spending in the first quarter from the fourth quarter. The 2008 to 2009 first-quarter difference for e-commerce saw activity down by 5.4%, while the 2007 to 2008 fourth-quarter difference for e-commerce saw activity down by 5.6%.

For overall 2008 to 2009 estimated retail sales changes, activity was down 9.1% from the fourth quarter of 2007 to the fourth quarter of 2008.

Some Numeric Comparisons

Total retail sales for the first quarter of 2009 were estimated at $909.6 billion, a decrease of 1.8% ('0.4%) from the fourth quarter of 2008, the Census Bureau said.

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

The first quarter of this year was the second time, along with the fourth quarter, that estimated total retail quarterly sales dipped back below $1 trillion, which the Census Bureau's estimates hit for the first time in the fourth quarter of 2007, and then continued for the next two quarters, although with an overall decrease of 0.6% in the first quarter of 2008 and a modest gain of 0.2% in the second quarter of 2008. In the third quarter of 2008, total estimated retail spending fell below $1 trillion, to just below $998.7 billion.

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

Adapting Is Important

But if a sow's ear can be made into a silk purse, perhaps tech-market savvy e-commerce lawyers are the ones who can do it; in fact, maybe they could make more than a purse, spinning their experience into a strengthened armor suit of ensemble e-advisement (and then handle suits, and suits).

“After weathering the dot-com crash, those who did not lose hope in e-possibilities may have a future using what we know about traditional law to sort out the problems inherent in applying it to the constantly developing online world,” Jaskiewicz says.

Not adjusted, the estimated e-commerce first-quarter sales figures look this way:

• $30.2 billion, down 17.7% from the fourth quarter;
• Down 5.7% from the first quarter of 2008; and
• 3.6% of all estimated retail 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.

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, 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.

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.

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.

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