U.S. Online Spending Rebounds as Shoppers Seek More Internet Bargains

U.S. online spending is rebounding
U.S. online spending is rebounding

U.S. year-over-year online retail spending increased for the first two quarters of 2010 after experiencing its first-ever decline last year, signaling that online retailers are probably taking market share from brick-and-mortar stores as cash-strapped consumers continue to search for bargains on the Web.

Americans spent $111 billion online for retail products through June, up 7% from a year earlier, with a year-over-year increase of 9% in the second quarter alone, research firm ComScore (SCOR) said Thursday, citing its July poll of about 2 million Internet users.

U.S. online retail spending fell 2% last year after experiencing years of 15% to 25% annual growth rates during much of the decade.

Change in Habits More Than Economic Recovery

This year's increase more likely illustrates a change in spending habits than a rebound for the sluggish U.S. economy, ComScore Chairman Gian Fulgoni said on a Webcast Thursday. Online-only retailers such as Amazon.com (AMZN) and Netflix (NFLX) as well as comparison shopping sites like NexTag and coupon sites showed growth rates that exceeded those of more traditional retailers' websites.

First-half online travel spending was up 5% while online non-travel spending increased 9% from a year earlier. Consumer electronics, computers, books and video games were among retail categories that continued to show strong online growth during the first half of the year.

"E-commerce continued to gain share of wallet within the consumer sector," Fulgoni said on the Webcast. "The job market has lost positive momentum. We could see weak spending levels in the third quarter."

Such potential weakness is already being reflected in online-spending demographics. While second-quarter online retail spending by younger people making $50,000 a year or less jumped 22% from a year earlier, and people making more than $100,000 a year spent 17% more online during the quarter, middle-income online spending fell 2%.

Generics and Online Shopping to Save Money

Many of those looking to save money say they're cutting back on eating out, entertainment and gift purchases, buying more generic brands and using cash or debit cards more often while using credit cards less, Fulgoni said. Just one quarter of those surveyed said they believed the economy has bottomed out, while three-quarters said the economy may continue to slow or they weren't sure.

Still, Amazon and Netflix helped lead a stable of retail websites that attracted 169 million people during the second quarter, marking a 13% year-over-year increase. Amazon, the world's largest online retailer, boosted site visits by 21% from a year earlier, while movie-delivery service Netflix increased visits by 34%, according to ComScore.

Meanwhile, Amazon, Dell (DELL), Staples (SPLS) and Costco (COST) accounted for 26% of second-quarter online spending from the most active 20% of Internet spenders. Those so-called "heavy" users spent an average of $615 during the second quarter, compared to a $30 average for the lower 50% of Internet spenders.

Additionally, Internet-only retailers, as opposed to multichannel retailers with a brick-and-mortar presence, accounted for 59% of second-quarter online commerce, up from 49% two years earlier.