Will the government shutdown affect holiday shopping?

October 11, 2013 Written by NetSphere Category: eCommerce
Will the government shutdown affect holiday shopping?
Every month, typically on the second Friday, the U.S. Census Bureau releases its advanced retail sales report. Except for this month, of course. This month, if you try to retrieve the report, you’ll receive the following message:
“Due to the lapse in government funding, sites, services, and all online survey collection requests will be unavailable until further notice.”

As of today, the shutdown has gone on for 11 days, sidelining the government reporting that helps to track and define the health of the economy. More impactful, however, the shutdown is affecting consumer confidence, which could take a toll on holiday shopping.

According to an article published on the Huffington Post and authored by Matt Winn, marketing communications manager at Volusion, consumer confidence has already taken a hit since the shutdown. As of Monday, Oct. 7, Gallup's daily consumer confidence index fell to -35, a drop of 20 points in just a few weeks.

To determine the impact that the shutdown could have on retail sales during the highly anticipated holiday shopping season, Winn examined the effects that a similar government debacle had on spending: the debt ceiling crisis of 2011.

“After the debt ceiling crisis, ecommerce sales in Q3 2011 dropped 3.18 percent as compared to Q2 of the same year,” he wrote. “To be fair, ecommerce sales historically decline between Q2 and Q3, but in 2011, the percentage drop was higher than in other years (3.18 percent in 2011 vs. 2.46 percent in 2010 and 2.82 percent in 2012). And while we can't claim a direct correlation, it's safe to say that the economic uncertainty cast by the government impasse had a negative impact for online retail sales.”

Further negative impacts on online retails sales are the 800,00 government employees furloughed from work as well as the trepidation permeating the rest of the population. More likely than not, consumers will be more apt to think twice before making purchases.

“Economic uncertainty will lead to more price-conscious consumers,” said Winn. “Less confident shoppers will be more price-conscious than usual, leading to an increase in comparison shopping and a decline in overall retail revenue. This might lead to a boost for online shopping, but will likely only help the largest online retailers like Amazon, who can afford to take razor thin profit margins.”

L Brands, the parent of Victoria's Secret; Costco Wholesale Corp.; as well as Gap Inc., which oversees the Gap, Banana Republic and Old Navy, have already reported less-than-positive results. Time will tell, however, whether sales will pick up. The U.S. Census Bureau’s consumer sentiment report will also tell – if it’s available on Oct. 29 when it’s slated for release, that is.

Regardless of the availability of government reporting, eCommerce companies will need to ensure that their websites contain the features and functionality that shoppers are looking for. To feel confident that the elements of your website are instilling confidence in your customers and potential customers, take advantage of the complimentary assessments that NetSphere Strategies developed to do just that.

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Abbe Miller is the marketing manager at NetSphere Strategies, located just outside Chicago. NetSphere Strategies is a boutique eCommerce company positioned to help businesses transform their online presence by providing a full complement of services that starts with our strategic consulting and creative design teams, then continues with building innovative solutions and providing ongoing post-project support.