Cyber Monday Shows Hints of Retail Recovery

Cyber Monday eclipsed Black Friday, posting a sales increase of 24.1 percent over the traditional bellwether, according to market research firm Coremetrics. The second-most closely watched indicator of holiday sales, delivered on expectations as an average of 4.2 million shoppers flocked to online stores, reports Internet tracking company Akamai Technologies. A survey from the National Retail Federation had predicted that 96.5 million Americans planned to shop yesterday, up from 85 million last year. Those who did go online to shop spent approximately $180 per order, an increase of 5.8 percent over online shopping on Black Friday.

Graham Jones of PriceGrabber.com says traffic to the retail comparison and aggregating website was up 10 percent over last year so far in November. “Black Friday was all about off-line stores. On Cyber Monday, they push online sales knowing that the customers who were in their stores browsing over the weekend are now looking for the best deals available,” Jones says.

John Challenger of outplacement firm Challenger, Gray & Christmas agrees. “A strong Cyber Monday is the shot in the arm that retailers need. They may have been holding off on some promotions in-store in favor of online values while waiting to see how many customers they had coming through the doors.”

And while traffic to traditional bricks-and-mortar stores was up this year, sales overall were flat, posting just a 0.5 percent increase, according to ShopperTrak, compared to an 11 percent increase in online sales on Black Friday, says Coremetrics.

Pressure to hold down costs is the main reason more shoppers are going online, says Challenger. “Recessions often accelerate longer-term trends in economic behaviors, and the monetary pressure people are feeling is sending them to e-tailers because they can save not only on products but on fundamentals, such as gas costs to get to the stores,” he adds.

Jones points out that the savings work for retailers as well, not just for customers. “It's more price-effective for them in terms of advertising because every time stores spend money promoting their products online whether it's through banner ads or what have you, they can immediately track the consumer response.” PriceGrabber, Jones says, updates deals from thousands of merchants up to six times a day, aiming to give shoppers the most up-to-date details throughout the holiday season.

So what are people buying? Largely the same items they were looking for in stores over the weekend. Electronics is the name of the game with the Wii console holding strong as the most sought-after gift. GPS devices are very popular as well, due mainly to their price points. “Last year the average price for a GPS started at around $260. This year, thanks to the likes of Wal-mart, they're below $100,” Jones says. “People want to buy electronics but they can't afford the flat-screens they bought last year, so a GPS gives them the chance to buy something in that category but not be out a ton of cash,” he explains.

Retailers largely lose money on their Black Friday promotions and have responded by cutting inventory. They use the special deals to bring customers into their stores, but once the featured product sells out, they're finding shoppers going online to place orders, especially since many of the Cyber Monday deals included free shipping—and on occasion—buy one, get one specials.

So will retailers further discount their goods on the heels of a lukewarm Black Friday but a solid Cyber Monday? Both Challenger and Jones think prices may be going down. “Retailers are waiting on final numbers from this weekend and Monday to see what they need to do. Deep discounting cuts into profit margins, so it's never their first choice,” says Challenger. Jones agrees. “Multi-channel retailers don't want to undercut stores with deals online. However, as we get further along in the holiday shopping season, that's where the discounts are going to go and it's going to be up to the savvy customers to find them.”