Net Retailing Rises as Ratio of U.S. Sales
U.S. Internet commerce as a proportion of total retail sales rose in the final three months of 2002 as consumers took advantage of free shipping and discounts to buy holiday merchandise.
Online retail purchases totaled $14.3 billion, or 1.6% of all sales, during the October through December months, the Commerce Department said. That’s up from 1.3% in the prior quarter and represents the largest share of all sales since the survey began in 1999.
Free shipping, discounting and ease of ordering online appealed to consumers, whose total spending accounts for more than two-thirds of the economy, economists said. Amazon.com Inc., the world’s biggest Web retailer, said more than 56 million items were ordered during the holidays. The higher share of Internet sales may have come at the expense of traditional retailers, which had their smallest same-store sales gains in three decades.
“It’s not as good as it should be,” said Richard Hastings, chief economist at Bernard Sands, a New York company that advises retailers in retailing trends. “The numbers show a slowing down of growth in consumption.”
The quarterly survey, which has been conducted for three years, also showed that Internet sales increased 29.3% in the fourth quarter from the prior three months. Compared with the same period in 2001, Internet sales were up 28.2%.
The growth has attracted states looking for new sources of tax money amid budget deficits. Wal-Mart Stores Inc. and Toys R Us Inc. are among U.S. retailers that have agreed to increase the taxing of sales on the Internet as states press for more authority to assess levies on Web transactions.
The government surveyed 11,000 businesses, including mail-order and online retailers, furniture stores, building materials dealers, new-car dealers, groceries and department and clothing stores. Online travel services, financial brokers and ticket sales agencies were not included.
Still, a slowdown in wage gains may restrain spending, economists said. Average hourly earnings in January were 2.7% higher than the same month last year. That was the weakest year-over-year growth since May 1995.
“With slower personal income growth, it gets much harder to envision where consumers will get the funds needed to sustain consumer spending growth,” said Scott Anderson, an economist at Wells Fargo & Co. in Minneapolis.
The new statistics aren’t adjusted for seasonal variations or broken down by industry.
Because of that, the government said the e-commerce figures shouldn’t be compared with private industry estimates.
Retailers including Wal-Mart and Toys R Us voluntarily this month began taxing $500 million of Internet sales they had not previously collected taxes on, according to John Coalson Jr., an attorney for the companies. At an average rate of 5.25%, $500 million in Internet sales would raise about $26 million in state taxes, a fraction of the almost $100 billion in deficits that states face in the next two years.
States also want more Internet transactions taxed because of the rising popularity of Web shopping.
A federal moratorium has barred states from requiring that retailers collect sales tax unless the business has a physical presence in the state.
For example, Barnesandnoble.com Inc. assesses taxes only in New Jersey, New York, Tennessee and Nevada, states where it has offices and warehouses.
