The Payment Management Blog

Mixed Signals of the Economy offered at the MRC

Optimistic and pessimistic prognosticators probably found something they could agree with in the morning session at yesterday's Merchant Risk Council (MRC) Annual Conference in Las Vegas. Wayne Best, VISA's Chief Economist, served up a well-researched opening keynote address that indicated continuing consumer spending caution. However, he offered a ray of sunshine, which was eCommerce continues to grow (Best quoted a 15% CAGR), and most organizations’ sales from online stores continue to increase. In addition, this year's MRC event was sold out early, and had the highest attendance ever for the annual conference. Put all that together and you get a picture of optimism on the outlook of eCommerce.

In another session, the member merchants of MRC's Payment Committee discussed the application of mobile device interaction and social networking on their own websites. While the session was relatively short, it was packed with good advice on how these technologies are impacting merchants across industries.

So, while it seemed as though the signals were mixed, my takeaways from the conference are: first, eCommerce continues to grow, even against a gloomy tide of consumer spending caution; and second, that uncertainty in the market means online merchants must continue to focus on operational excellence and the value of new technologies to stay ahead of competition.

The conference continues today and I’m eager to find out what is being shared in the sessions.

--Paul Brock, blogging from the conference floor

Department of Commerce Estimated Strong E-commerce in Q4 2009

Recent up-and-down activities on the global stock markets may not be indicative enough of economic recovery, but what about e-commerce trends? Following Q3 2009's numbers, here’re some latest statistics from the Department of Commerce. The Census Bureau has published the Q4 2009 quarterly report for online sales by U.S. Retailers, representing up to half of U.S. e-commerce. The rest are online sales that include services such as travel, and wholesalers and manufacturers selling direct to consumers.

The preliminary estimates show a strong re-bound in online sales by U.S. retailers in the last quarter of 2009.  Year-on-year growth was 14.4%.  This growth rate is similar to levels last seen in Q4 2007 prior to the start of the recession.   While the higher growth rate can be partially attributed to the comparison with a weak 4Q 2008, the last quarter of 2009 did set a new online sales record, estimated at $35.85 billion and comprised 3.8% of total U.S. retail sales.  The strong Q4 performance turned a flat to negative growth year for 2009 online retail sales into a positive 1.7% growth.

While the US economic engine is far from full recovery, this is one positive sign.

Reading More Tea Leaves

People concerned with the recovery of the economy are watching this shopping season like a football play-by-play. Every statistic counts - it could validate, overturn, or be ineffectual to any theories out there. The latest milestones in the U.S., Black Friday (day after Thanksgiving) and Cyber Monday (first Monday following Thanksgiving break), garnered lots of analysis this week. Is a V-shape recovery imminent? Or is it just temporary optimism with underlying continuing economic weakness?

Regardless of the debate, a consistent theme that surfaced over the last few years is that in order to survive in today's retail environment, a working e-commerce channel is a requirement. It is the only channel that is still growing and able to give merchants the business boost they need. However, for the e-commerce channel to actually bring in customers, there are some operational requirements merchants should observe, such as making sure the server can handle the traffic, or having the right sales promotions available. It's nothing that hasn't been discussed before - just more validation that e-commerce is a key strategic driver for today's retail business. 

Reading the Latest Tea Leaves

If the recent mixture of mixed signals about the economy hasn't confused you, here's another.

The U.S. Census Bureau released its preliminary estimates for 3Q 2009 online sales by U.S. Retailers on November 18, 2009. This data series covers approximately half of online B2C commerce in the U.S. as it excludes online B2C sales by manufacturers, wholesalers, and services such as travel.The preliminary estimates show growth returning to online sales (at least for Retailers) with a +1.8% year over year growth in 3Q. This growth is leading overall retail sales growth which had a -7.5% year on year decrease in 3Q. As a result the share of Retailers’ sales coming from the online channel is increasing – reaching a new high of 3.7% in 3Q09.

This could be a sign for positive 4Q and holidays sales growth - definitely a bit of positive news amid the high unemployment rate and number of foreclosures.

This, Too, Shall Pass - Get Ready for the Upswing

Despite the ups and downs of the stock market and leading economic indicators, most authorities and experts agree that the economy will recover at some point in the future - however, the timing and pace of the recovery is debatable. (Most recently, Federal Reserve Chairman Ben Bernanke touched off a storm of controversy by indicating that the economy is on its way to recovery.) 

Regardless, as a merchant trying to navigate these turbulent waters, you need to look ahead for your business's viability. It never hurts to get ready. To that end - with the help of our customers - we pulled together a list of projects for your payment operations to help you better support a recovered retail environment. The 2010 Project Guide: Staging for Recovery suggests the top 5 initiatives your peers are undertaking.

The list includes expanding your payment acceptance options; dealing with sophisticated fraud threats such as botnets; managing authorizations to increase revenue capture and reduce processing costs; securing your payment operations by eliminating payment data from your environnment; and increasing your scalability by consolidating your systems. The guide includes details on the what technologies to consider, as well as the implementation costs and timing.

Register for the project guide here.