Online Retailers Feeling Pinch Of Sagging Global Economy

December 29, 2008 8:01 a.m. EST

London, England (AHN) - Consumer online spending with retailers is likely to fall far short of the industry's expectations. Early estimates from the United Kingdom's 28 million online shoppers say they have spent $14 billion dollars online this Christmas according to research conducted by Moneybookers, Europe's leading online payment system. This total calculated ahead of the big day falls 30 percent short of the amount estimated by early industry calculations conducted by market analysts in November.

Furthermore, consumers spent less during Christmas in 2008 than they did in 2007 as tightened budgets caused consumers to keep their wallets closed, spelling further bad news for online retailers.

Some 19 percent of respondents said that they expected to spend more online in 2008 than they did a year ago, 27 percent said they had spent less, while 53 percent said that they spent the same amount this year.

Nikolai Riesenkampff, joint-Chief Executive of Moneybookers says, "The past four weeks have been tough for online retail - much as it has been on the British high street. While online sales will have grown in 2008 - particularly as consumers have turned to the web in an effort to cut the cost of the festive season - they have done so at a slower rate than during previous Christmas seasons."

"Our data on consumer spend shows that the last two months have seen online shoppers rein-in their festive spend as rising household costs and fears about the economy set in. That said, online retailers will be celebrating as total sales have edged nearer double-digit billion amounts. So although revenues may be lower than hoped for, they are still a substantial part of the economy and further validation of the importance of online retail."

Financial analysts advise online retailers to manage costs going into 2009 and focus on driving better margins as growth slows. One example of doing this is reducing the cost of fraud, which is estimated to cost online retailers 1 percent of total revenues. Online marketers say fraud costs can be cut by attracting those new to online shopping by offering more secure methods of payment.