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E-commerce seen taking a greater share of US holiday shopping sales

Retailers are on track to see online sales grab a greater percentage of their overall retail sales this coming season, according to a new analysis by S&P Global Market Intelligence.

Over the past nine years, e-commerce sales have steadily increased as a percentage of overall retail sales. In 2016, e-commerce sales as a percentage of total sales hit 9.4% during the fourth quarter, compared to just 4% of total retail sales in the fourth quarter of 2007, according to the analysis.

If the latest retail sales data tracked by the U.S. government in the fourth quarter to date in 2017 is any indication, that trend will continue.

In October and November, online sales, which are part of the nonstore sales category tracked by the U.S. Census Bureau, have grown.

Nonstore sales rose 6.9% year over year on an unadjusted basis, while those sales increased 10.4% based on a preliminary estimate in November, according to the latest monthly report released Dec. 14.

"The online part was definitely the big thing that happened this year," said Chris Christopher, executive director of U.S. and global economics at IHS Markit, in an interview. "More and more, holiday sales are taking a bigger chunk of the pie."

Christopher said competition from Amazon.com Inc. is "pushing things," and as a result, holiday shopping is beginning earlier. Most brick-and-mortar retailers started their holiday sales earlier than Black Friday to give customers a wider window to come into stores, he said. It is a trend he expects to continue in the future as brick-and-mortar retailers continue to compete for diminishing physical foot traffic throughout the holiday season.

Overall retail spending during December has steadily increased since 2008, according to the analysis. In December 2016, retail sales, excluding food services, hit $484.76 billion on a seasonally adjusted basis, higher than the $465.53 billion in December 2015, according to the analysis.

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E-commerce has become increasingly more important in driving holiday shopping, said Brian Yarbrough, a retail analyst at Edward Jones, in an interview.

Retail sales overall have grown throughout December in the last 10 years, but online sales are taking an increasingly larger share of that growth, he noted. "It's hard to gauge holiday shopping this year versus even just last year," he said. "More and more is done online."

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Online sales for Black Friday grew 16.9% to $5.03 billion in 2017, compared to the same period last year, according to Adobe Digital Insights. On Cyber Monday, which fell on Nov. 27, online sales rose 16.8% from the same period last year.

While e-commerce sales continue to account for a greater percentage of overall retail sales, retail employment in some brick-and-mortar segments, such as department stores, has fallen on a year-over-year basis in December, the analysis showed.

Department store employment fell to 1.45 million in December 2016 on an unadjusted, year-over-year basis, down from 1.46 million in 2015 and 1.79 million in 2007. Department stores, like many companies that operate largely in malls, depend on brick-and-mortar foot traffic to drive sales.

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Meanwhile, employment at nonstore retailers, a category that includes e-commerce, jumped to about 573,200 in December 2016 on a nonadjusted basis, compared to 487,000 in December 2007, according to the analysis, which was based on U.S. Bureau of Labor Statistics data.

Amazon alone announced in October that it would hire 120,000 people during the holiday season in fulfillment centers, sortation centers and customer service sites. Wal-Mart Stores Inc., the largest brick-and-mortar retail employer, said it would give more hours to its current workers "rather than hiring thousands of seasonal workers."

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Analysts said e-commerce purchasing has also influenced holiday sales patterns.

While retailers traditionally expect a lull between Thanksgiving and the days leading up to Christmas, that lull is becoming more significant as e-commerce becomes more prevalent, Christopher said.

"Promotions have been happening sooner and sooner, and the holiday shopping season, which traditionally began on Black Friday, has been creeping into Halloween," he said.

Yarbrough said the shift to earlier promotions is a strategic move to draw traffic to stores, as customers are becoming more skittish of large Black Friday crowds, preferring to either shop earlier or online, he said.

Consumers will have a full extra shopping weekend before Christmas because the holiday falls on a Monday.

That extra weekend should boost total retail sales figures in 2017, both in brick-and-mortar traffic and online, Christopher said.

"One thing that's going to play up a lot this particular holiday season, Christmas day is on a Monday," he said. "That gives us a little bit more retail action."