It’s the most wonderful time of the year
With the kids jingle belling
And everyone telling you “Be of good, cheer”
It’s the most wonderful time of the year
It’s the happiest season of all
With those holiday greetings and gay happy meetings
When friends come to call
It’s the happiest season of all…especially for the retail
sector, Duygu Tavan finds.
For many of us, Christmas is the time of year
to celebrate. And no sector has more reason to celebrate as retail.
This season especially, has been a wonderful time of the year
indeed, various data shows.
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According to comScore’s latest measure of
digital spend, the US retail e-commerce market has registered a 15%
growth in year-on-year spending worth $15bn among consumers
online.
On Cyber Monday alone – the Monday after
Thanksgiving weekend, online spending rose by more than a fifth
(22%) on the corresponding day a year ago to $1.25bn. This,
according to comScore, represented “the heaviest online spending
day in history and the second day on record to surpass the
billion-dollar threshold.”
For comScore chairman Gian Fulgoni, Cyber
Monday marks this “yet another historic” day for the e-commerce
sector. And comScore is certainly not the only organisation that
has tracked the phenomenal influence of Christmas on
e-commerce.
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And comScore is certainly not the only
organisation that has tracked the phenomenal influence of Christmas
on e-commerce.
In the UK, payment processor Sage Pay also
recorded what it called “record-breaking transaction volumes” on
Cyber Monday: Transactions volume grew by 17% compared with a
year-ago, with average spending growing by £3 to £91.
Sage Pay’s managing director Simon Black says
that e-tailers can take “some solace” in the growth of online
transactions. Black argues that public sector strikes, the closure
of 200 Arcadia group stores (which include high street chains
Topshop and Miss Selfridge) and the UK chancellor of the
exchequer’s Autumn Statement creates a bleak outlook for the UK
economy – but there is real potential for online business
growth.
comScore’s Fulgoni says that it will be
interesting to watch the next couple of weeks to see if any future
individual days in 2011 manage to leapfrog this year’s highest
day-to-date.
“It will be important to continue to monitor
the trend in consumer spending to determine the degree to which
retailers’ heavy promotional activity at the beginning of the
shopping season, and consumers’ encouraging response, has pulled
forward consumers’ future buying. It will also be vital to see
whether retailers’ deals and price discounting, which
consumers are now able to discover via so many different
digital media channels, will have a negative impact on retailers’
margins,” he says.
Same trend in developing and developed
markets
Referring to data that MasterCard has
collected internally, Tony Costella, the network’s senior business
leader, consumer & market intelligence, confirms the trends. He
refers to data from both the UK and the Czech Republic – each
an example of a developed e-commerce market and a developing one
respectively – to explain that in both countries, each year, around
Christmas time, the volumes of transactions made online soar.
What is phenomenal, he says, is that after
Christmas, “the volume continues to rise, at a similar, relatively
steady growth rate to the previous year – but having jumped up the
scale.”
The pattern of spend drops again between
January and April/May, but what Costella emphasises is it does
continue to grow at a steady growth rate that is higher than the
pre-Christmas period from the previous year.
This optimism in the growth of the e-commerce
sector confirm European Central Bank (ECB) data Electronic
Payments International published in October: e-money, among
all payment methods, is the only one that is showing consistent
growth in value of transactions, despite accounting in 2009 for
only 0.01% to total European electronic payments value. E-money is
growing from a low base, but it has keep growing for the last seven
to eight years at double digits rate. The ECB data had also shown
that cash in circulation had increased – which analysts explained
as a common phenomen during a crisis when consumers turn to
physical money to budget their spending.
But the latest World Payments
Reportby Capgemini, Royal Bank of Scotland (RBS) and EFMA
found that the volume of non-cash transactions amounted to 260
billion in 2009 – 5% higher than the previous year.
Between 2001 and 2007, the CAGR growth rate
was 7.2%. 2009 was the first year in which the report registered a
downturn mood for non-cash payments, yet, overall, the 5% CAGR
growth of non-cash rate globally in 2009 was an important signal
that confirmed how resilient and strong non-cash payment are and
the role that payments play in the economy. This does not mean that
Christmas is helping the electronic payments market to eliminate
cash, however.
As industry insiders highlight, different
payment methods have different roles and capture different degrees
of preference from payers, leading to varying volumes and value of
flows of transactions going through an economic system.
This would explain why ATM cash withdrawals in
the week spanning Thanksgiving weekend and Sunday 4 December, had
risen by 11% compared to the corresponding period last year,
amounting to £2.6b, according to UK ATM network LINK.
The end of November and beginning of December both registered
the highest increase in year-on-year terms, growing by 25%.
According to LINK CEO John Howells, the volume
of cash withdrawn from ATMs indicated the health of the economy.
Howell’s explanation of “health” may sound positive, as he argues
that the money withdrawn from ATMs is spent on entertainment, food
and groceries.
Graham Mott, head of d
evelopment at the LINK
Scheme, says the findings do not contradict the rise of e-commerce.
“There is always a big rise in the value of cash withdrawals at the
end of November, beginning of December.
“It is unusual for cash withdrawals to
decline. Some people prefer to use cash; it is a budgeting issue
because some people find it difficult to keep track of spending
when they use their cards. People don’t spend that cash to buy
present, they spend it for parties, going out for meals.
E-commerce is usually for big food shopping,
presents – not things that consumers used to pay for with cash
previously anyway. There is not much displacement from cash to
online. Obviously, the gaming, music sector is a massive market for
e-commerce and some retailers move online. So the rise in cash
withdrawals and e-commerce is a parallel trend,” Mott argues.
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