Monday Likely Biggest Online Shopping Day in U.S. History

bjbjVwVw JEFFREY BROWN: A still tentative American economy looked online today, as digital
deals were to be had, and holiday shoppers lit up Web sites. Retailers had high hopes
that Cyber Monday sales would add to what's been a strong start so far. If all goes as
expected, today will end up being the busiest online shopping day of the year, with major
bargains and steep discounts just a click away. MARSHAL COHEN, The NPD Group: Every
year, we keep seeing more and more consumers shopping online, both the younger consumer
which was born with a computer in their crib. They're very comfortable with doing it. And
the older generation is also now shopping online. Deals are becoming plentiful. JEFFREY
BROWN: All told, the research firm comScore estimates Americans will spend $1.5 billion
online today. That would be an increase of 20 percent from last year. In anticipation,
Amazon.com and other major online sellers are going all out to keep up with the spike
in demand. And all this follows a successful opening holiday sales weekend that began on
Thanksgiving night. The National Retail Federation reports a record 247 million consumers have
cashed in on door-buster deals in stores and online. On Friday alone, Internet sales surpassed
the $1 billion mark for the first time. For more now about the early impact of this shopping
season and the broader economic trends, Nariman Behravesh is chief economist for IHS, a research
and forecasting firm. Nancy Koehn has written about the retail industry as a historian at
the Harvard Business School. And Neil Irwin is an economics editor and columnist for The
Washington Post. Nariman Behravesh, let me start with you. What's the overview of the
number so far? What do you take from them? NARIMAN BEHRAVESH, IHS Global Insight: Well,
there are a couple of trends, obviously. One is that the consumer is in a very good mood,
for good reason. Income growth is decent. Job growth is coming along, as it were. Housing
is doing well. So consumers are in a pretty good mood. Consumer confidence is at a four-year
high and that's getting reflected in the Christmas sales, if you will. They're solid. They're
reasonable strong, 4 percent-5 percent growth year over year. But as you were saying earlier,
it's really the online sales that are booming. They're growing well into the double digits.
You mentioned the 20 percent rate. That's about what we're expecting for this year compared
with last year, so solid growth in terms of the total spending of consumers on Christmas
goods and holiday sales and stuff. But the really interesting story is the online story,
where it's just growing like gangbusters. JEFFREY BROWN: Let me ask Nancy Koehn, because
we talked about this expanded shopping season, earlier than Thanksgiving and now Cyber Monday.
How are retailers dealing with this change? It's a landscape that has changed even from
a few years ago. NANCY KOEHN, Harvard School of Business: Very much so. It's a landscape
with which all these boundaries are blurring, the boundaries between brick and mortar and
online, the boundaries between channels. It's like someone took a big pink eraser and like
smudged all over retail. So, smart retailers, everyone from Neiman Marcus at the high end
to Target in the kind of high-low category, are figuring out how to use the Web, including
smartphones, right, including apps for smartphones, to draw traffic into their store, to increase
their online sales, and to really try and make one plus one equals three. And it looks
like, for places like Target, again, places like Apple, that strategy is working very
well. So a changed game, a game that's really very dynamic in which everyone is hunting
and gathering, retailers for customers, customers for deals. JEFFREY BROWN: And, Neil Irwin,
there's still a lot of attention on the weekend and sort of this season as an indicator. But
you have written that maybe it's not such a good indicator. NEIL IRWIN, The Washington
Post: Yes. I know we all love these stories of people rushing through the doors of the
Wal-Mart to get their television or all these sales and everyone going online of course
today on Monday. In fact, as a broader indicator of what's happening in the retail sector,
it's not the best indicator in the world. It doesn't tell you a whole lot about what
happens throughout the holiday season, what happens to personal consumption as a whole.
That said, this is a very important season for retailers. This is an important season
for economy. And with all the uncertainty out there, to see a good start to it is better
than the alternative. JEFFREY BROWN: So, what do you see? Pick up on some of the things
we just heard about. NEIL IRWIN: Yes. Well, as Nariman alluded to, the American household
is starting to fix its financial problems. It's gradual, it's halting. Debt service ratios
are down to the 1990s level. The level of household debt to GDP is down to early 2000
levels. So we're making progress in paying off these debts from the boom years. The job
market is gradually crawling back. And, actually, consumer sentiment, it stepped down a little
in November, but is actually -- was up a good bit in September and October. So, American
consumers are feeling better than they were a year ago. The question is how much does
that translate into cashing their -- making purchases at the store? JEFFREY BROWN: Well,
Nariman Behravesh, that is the -- consumers are feeling a little better. Are businesses
feeling a little better? Are they investing? Are they maybe hiring? What -- how does all
-- how does that work? NARIMAN BEHRAVESH: Well, in a worrying way, they're not. And
we do have this disconnect in the U.S. economy between consumers on the one hand -- and they
account for 70 percent of the economy, but they're feeling fairly good about things,
whereas businesses are not. And businesses tend to be more worried about things like
the fiscal cliff. They're more worried about the troubles in Europe. They're more worried
about the slowdown in China. So, you do have this disconnect. The big concern now is, which
way is it going to go? Who is going to win this tug-of-war? So far, it's the consumer,
but let's hope it's not the other direction, because, as I said, let's hope that the businesses
will eventually come around to thinking about things the way consumers are. JEFFREY BROWN:
Nancy Koehn, I want to come back to you on this question of online shopping and the changed
landscape, because does that have a real impact on -- does the rise of online shopping have
a real impact on the economy or is it just sort of shifting, transferring where people
buy their -- buy their -- buy their things? NANCY KOEHN: Well, I think that's a very open
question, partly because this is so new and the marriage and the magic of online plus
bricks and mortar. I mean, there's no question people are visiting online websites more often
than they do stores. Whether that adds up to kind of incremental, organic growth is
a question we just don't know, because, remember, we're starting with all online sales from
a much, much lower base when we talk about brick and mortar sales. We're talking about
hundreds of billions of dollars, $600 billion in predicted holiday sales. Only a small portion
of that, maybe 20 percent, but much more likely somewhere around 10 percent, will be online
sales. I think some of that is really organic and new, but we don't yet have the numbers
for this holiday season. You know, as several people have commented today, we don't even
know that this kind of momentum, which is very real, very significant for this five-day
holiday spree, much more than even the boom optimists predicted, whether that will continue
into the long holiday season still ahead. JEFFREY BROWN: Neil, what do you look at when
-- the question of online shopping, is it its own thing? Does it add to the whole? What
is its impact in the larger picture? NEIL IRWIN: People are going to spend based on
their incomes and their jobs and their paychecks. Ultimately, whether that spending happens
online at Amazon or in a store, you know, it matters for the retail sector. It matters
for all kinds of workers in that sector. But in terms of the overall economy, what matters
is how much people are spending. One man's spending is another man's income. And getting
to a place where more people have jobs, people have higher incomes, that's the goal, wherever
those dollars happen to be spent. JEFFREY BROWN: And what is your reading on the psychology
of consumers now? You were saying earlier that the debt overhang seems to be better.
Is there a pent-up demand? Can we tell yet? NEIL IRWIN: Not much sign of pent-up demand.
One thing I'm worried about is this fiscal cliff issue, the tax increases and spending
cuts that take place Jan. 1, unless Congress and the president reach a deal, that business
has been worried about that for months. Maybe consumers are starting to -- maybe it's starting
to creep into their thinking as well. We saw a weaker consumer sentiment number last week.
That's the kind of thing to watch, to worry about as we wonder what this holiday season
is going to be like. JEFFREY BROWN: And, Nariman, I want to ask you, is it strange or have things
really changed? Because on the one hand we want people to get out and spend, but on the
other hand we still talk about overspending and spending with money that people didn't
really have was part of the problem that got us into this state in the first place. So
what's -- that sounds like a little bit of a disconnect. Where are we on that? NARIMAN
BEHRAVESH: Well, I think Neil is right in saying that consumer finances are in much
better shape right now. So, in that sense, the kind of spending we're seeing now is more
sustainable. It's healthier in a sense. Debt levels are down. People are not taking, say,
home equity out to spend on a car or, you know, on a flat-screen TV. So it's a much
healthier kind of spending. I'm much more optimistic that it can be sustained, it can
be continued, and it's not going to be sort of a house of cards that's going to collapse
at some point. So, in that sense, I think there is room for optimism. JEFFREY BROWN:
A brief last word on that from you, Nancy Koehn? What do you see? NANCY KOEHN: Could
not agree more. I think consumers are much smarter, much savvier, much more adaptable.
You notice how much consumer sentiment bounces around month to month. That's not a capricious
consumer. That's a consumer who is taking their pulse and adjusting their wallets and
their spending very quickly without access to the kind of debt and house of cards financing
that we saw for the early part of this decade. JEFFREY BROWN: Even, Neil, if they're lining
up overnight, right, to get to a deal. NANCY KOEHN: Even if they're lining up. JEFFREY
BROWN: All right, Neil Irwin, Nancy Koehn, Nariman Behravesh, thank you, all three, very
much. NEIL IRWIN: Thanks, Jeff. NANCY KOEHN: Pleasure. NARIMAN BEHRAVESH: Thank you. urn:schemas-microsoft-com:office:smarttags
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