Saturday, August 20, 2011

June Deliverable Retail Sales Remain at 20.5% of Total

The U.S. Census Bureau retail sales data released last week showed that in June, the share of seasonally adjusted retail sales that are sold on-line or via a catalog rose to 20.5% of retail sales from merchants selling products that are sold both in brick and mortar stores, on-line or through a catalog. This means that 20.5% of all retail sales that could be delivered by FedEx, United Parcel Service or the United States Postal Service, are being delivered by these firms. (Details on how the proportion is calculated are at the bottom of this post.)

June represents the seventh month in a row that on-line/catalog merchant sales were more than 20% of sales of items that could be delivered to a consumer were delivered to the consumer rather than purchased at a retail store A year ago 18.8% of sales of items that could be delivered to a consumer were delivered. The following chart shows retail sales data dating back to 1992 as provided by the Census Bureau.
Explanation of Chart DataThe proportion illustrate in the chart represents the proportion of catalog and on-line sales estimated by the Census Bureau as a portion of sales at furniture & home furnishings (442), electronics & appliances (443), clothing & accessories (448), sporting goods, hobby, book, and music (451), general merchandise (452), office supply, stationery, and gift stores (4532) stores as well as on-line and catalog merchants (4541). [The numbers in parentheses are the NAICS codes used by the Census Bureau to classify businesses.]

Differences with Census Bureau Estimate

The Census bureau estimates the e-commerce proportion of retail sales quarterly in its Quarterly Retail E-Commerce Sales Report.   The most recent report for the 2nd quarter of 2011, reported that 4.2% of all retail sales.  While the Census Bureau's proportion is different, it shows a similar shift away from brick-and-mortar retail sales. The chart is from a Wall Street Journal story.

The Census Bureau's proportion differs in two important respects.
  1. The census bureau uses a narrower definition of e-commerce sales as follows but applies that narrow definition to more types of retailers.  The Census Bureau's definition is:  E-Commerce Sales are sales of goods and services where an order is placed by the buyer or price and terms of the sale are negotiated over an Internet, extranet, EDI network, electronicmail or other online system.  Payment may or may not be made online.   I classify all catalog merchant sales as e-commerce sales.  I do not include e-commerce sales from any retail category that I include in the denominator of my ratio other than sales from on-line and catalog merchants.  This reduces the e-commerce sales that my ratio would measure if I included that data. 
  2. The census bureau uses all retail sales in its denominator.  By including all retail sales, Census bureau captures some categories that have significant retail sales but more importantly, includes numerous categories that consumers prefer brick and mortar outlets for their purchases.  These include retailers that sell motor vehicles and motor vehicle parts  (441), building materials and garden equipment and supplies stores  (444), food and beverage stores  (445), health and personal care stores  (446), and gasoline stations (447).  [The numbers in parentheses are the NAICS codes used by the Census Bureau to classify businesses.]
Advantages of the CEP E-commerce Index

The CEP E-commerce Index has significant advantages for policy makers looking at the future of parcel delivery and brick-and-mortar retail sales as it more closely reflects the proportion of retail sales that can be delivered to those that are delivered. THE CEP E-commerce Index also provides a better sense as to expected growth in parcel deliveries that the major parcel delivery carriers and their investors need to know to plan their networks and make investment decisions.

Based on data contained in the 2007 Economic census and the 2007 Retail Sales Annual Report, the Census Bureau most likely estimates that around 1/8 of all sales of catalog merchants, which includes merchants like QVC and the Home Shopping Network is an e-commerce sale. In 2007, over 22% of QVC's sales were from its web site, and 28% of all sales of the Home Shopping Network were web sales.    The other 7/8 of these sales still need to be delivered and web-enabled phones and televisions proliferate, the difference between a telephone and web-based sale for these merchants does not affect the fact that all of their sales must be delivered.

Future improvements in the CEP E-commerce Index will come after further evaluation of all data collected by the Census Bureau, the Direct Marketing Association, and companies that offer both brick-and-mortar and retail sales. 

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