The good news this holiday season is that online spending for gifts is up. Depending on the source, the rise is somewhere between 4% and 9%.
The missing piece of the story not reflected in those numbers is that people are spending much less per transaction. While activity may be up, retailer profitability may be down, way down.
According to The New York Times, the Chase Paymentech's Cyber Holiday Pulse Index tells a depressing story. "Chase's index, which surveys 25 of the largest 150 retailers on its Internet payment processing network, showed that the average shopper spent $7.19 less per transaction on Cyber Monday this year over last."
Online spending is not likely to be the only place where this is happening. Consumers, under financial pressure due to lack of credit and concerns about their jobs, are probably spending less everywhere they go. That would make sense. Getting overextended financially is much more risky this year than at any time in the recent past, perhaps going back decades. Why shell out a lot of money? Who knows how bad 2009 will be.
Retailers work on narrow margins, sometimes as low as 2%. Discounts can wipe that out. Comparisons with last year's shopping activity can be very deceiving.
Douglas A. McIntyre is an editor at 247wallst.com.
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