Online Off!

Have you noticed how many bargains have sprung up online? Fat good it will do you if you don't have any money. Ah! There's the rub.

Lack of money or lack of confidence or lack of both is keeping consumers away from e-commerce sites in droves. This dearth of customers is forcing etailers to reduce prices as never before. It's a great time to buy, but few are buying. And that spells trouble with a capital "T" for tanking profit margins.

How did this happen when online shopping sites have been accustomed to double-digit growth each year? Blame it on soaring oil prices that are now falling back to earth, inflated food prices and deflated property values. These off-line areas have fleeced the pocketbooks of millions leaving little discretionary spending, the stuff of which online purchases are made.

How bad is bad? E-commerce market research firm comScore, Inc. says online spending actually grew, but by just 1% in October 2008 over October 2007. That's barely a blip on the radar screen compared to double digits as recently as June. Some of the e-commerce sectors hardest hit are music, movies and videos with a sales decline of 29%. Books and magazines aren't far behind with a drop in orders of 17%. comScore President and co-founder Gian Fulgoni says, "The sales decline is unprecedented" and does not bode well for the future of some sites.

If famine is to turn into feast, who is likely to feed it? The mainstay of online spending has historically been consumers in the $100-thousand dollar income bracket- assuming these individuals still have the same amount of disposable income. Customers who have money to spend despite investment losses on Wall Street are the most valuable commodity in the marketplace right now whether online or off. So, look for sites to make these folks their new bull's eye demographic.

If you have money to spend, you have tremendous opportunity for buying a lot with less. To stake a claim on all the deep and early discounts of the season, comparison shop like crazy. There is an all out price war out there and it's likely to heat up. That also means you probably won't lose by waiting for those discounts to be even deeper later as the holiday shopping season wears on.

However, pay special attention to shipping costs. Kmart, a division of Sears, is providing free shipping on purchases over $49--the first time ever Kmart has offered to send you what you buy for free. On the other hand, paper-thin profit margins may also force some e-commerce vendors who were shipping for free to start charging or to raise the qualifying threshold. However, that is a double-edged sword. Marketing surveys show without free shipping many online customers would revert to brick and mortar stores.

There is a bright spot that could bring online business back to the future. The sudden drop in oil prices is expected to pull back on inflation and free up some consumer spending power. At the same time, websites are paying more for advertising on the highly visible Google search engine, and that too is cutting in to their bottom line.

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