Retail e-commerce falls 3 percent in fourth quarter

Retail e-commerce posted its first quarterly decline in at least eight years, during the normally robust fourth-quarter holiday shopping season, according to a report released Thursday by ComScore.

During the fourth quarter, retail e-commerce sales fell by 3 percent to $38 billion, compared with a year ago.

"I thought things would be flat, so this was a little worse than I thought," said Gian Fulgoni, ComScore chairman.

He attributed part of the decline to fewer post-Thanksgiving shopping days in November last year, compared with the same time in the previous year when there was nearly one full additional week.

Retail e-commerce, however, was up 6 percent for 2008, compared with the previous year. And within the various e-commerce sectors, video games, consoles, and accessories--historically the strongest performer for the past few years--posted a 29 percent year-over-year increase.

Music, movies, and videos, excluding those that are downloaded, fell 23 percent for the year, marking the worst performing category. Fulgoni noted that that category has historically performed the worst among the e-commerce categories.

Office supplies, which declined 10 percent, and jewelry, which fell 12 percent, posted gains over the past years, but this time around moved into the red as the recession took a number of companies out and made disposable income scarce.

And Fulgoni surmised that the 8 percent decline in online book sales could be tied to fewer people traveling by airplane and needing reading material to take on board.

While the fourth quarter marked the first time retail e-commerce sales encountered a quarterly decline, the industry has been posting shrinking sequential growth on a quarterly basis since the fourth quarter 2007.

"Gasoline and food prices began to go up with inflation in the fourth quarter of 2007, sucking away disposable income," said Fulgoni, who noted disposable income is predominately used for online purchases.

Staples such as groceries and necessities like fuel and energy are largely sold offline and, as a result, helped to prop up total retail sales during late 2007 and the first half of 2008, while growth in retail e-commerce sales continued to decline, Fulgoni said.

ComScore expects to release its January retail e-commerce results next week and Fulgoni said he's keeping his fingers crossed a little bit of growth will be reflected in the results.

"Gasoline prices are beginning to drop and that may put a little money in people's pockets," Fulgoni said. "But what may hurt us is the growing unemployment rate."