The ‘1 Percent’ Problem with E-Commerce

It was a sweet bit of news from the U.S. Department of Commerce. Despite some lackluster months for e-commerce, the agency said, online spending jumped 15 percent from the second quarter to the third. In all, Americans spent US$6.3 billion online from July through September.

Finally, there was something to balance the grim reports of dot-coms on life support. There was the Undersecretary of Commerce, telling us to read from the government numbers that “Americans appear to be becoming more comfortable with shopping online.”

That’s an endorsement, if you ask me. Couple the Commerce study with a strong start to the holiday shopping season, and suddenly anything seems possible for e-commerce.

But as always, there is a dark lining to this silver cloud. And this time it is a relatively small number. The number is one.

The Power of One

Call it a glass ceiling for Internet commerce. Despite the sizeable growth, the Commerce Department said that online buying still accounts for less than 1 percent of the overall consumer spending in the United States. Again.

In fact, that number recurs every time e-commerce growth is measured and reported, and is almost universally cited as a qualifier, such as: E-commerce is growing dramatically, can cure cancer and is fun for kids ages 8 to 80, but still only accounts for less than 1 percent of all consumer sales.

It might seem like a laughable goal in a way, but it seems to me that the next big test for e-commerce is to get over the 1 percent hurdle. In some small but significant way, doing so will turbo-thrust the industry and give online retailers a genuine shot at a much bigger piece of the entire 100 percent.

Knock, Knock

For the third quarter, the percentage of total retail sold online stood at .78, up from .68 in the second quarter. (Not 78 percent, just to be clear, but point-78 percent.) It helped slightly that overall sales were down to $812 billion, but the important news is that the gap shrunk. E-commerce is knocking on the ceiling.

But the ceiling must be busted entirely. Until then, critics can continue to marginalize e-commerce as an up-and-coming sector or a way of shopping favored by a select few. It is too easy for the media to use the 1 percent number as a reminder to everyone that e-commerce has yet to graduate past the crawling stage.

There is no magical formula for e-commerce to break Mach 1, or Mock 1. If trends hold and predictions come true, it may happen this quarter. Or it may take additional quarters of slow and steady growth, each one building on the next.

The Long Road

In any case, there can be no back-sliding, no gliding and no breathers. If crashing through the ceiling proves something positive, falling back below it would be equally telling in reverse.

Yes, all the chips are on the table for the holiday season, but even if record sales are rung up and the most optimistic predictions are surpassed, the game won’t be won. It will likely be well into next year before e-commerce goes above that water line of 1 percent for good.

In other words, it’s going to be a grind — a long and difficult one. But a worthwhile one.

Making a Statement

Will something magical happen when e-commerce is said to have broken past the 1 percent mark? Nothing concrete. The sky won’t part. Angels won’t begin to sing the praises of Amazon.com.

But in another way, it will be meaningful. It will be a milestone, though a largely symbolic one, that will give notice to the rest of the consumer world. With a dozen or so e-tailers on Goldman Sachs’ deathwatch list, with investors putting their money away and waiting to see what happens, the sooner the better.

What do you think? Let’s talk about it.