Cyber Monday starts online shopping season

Firm predicts season sales at $29.2 billion, unchanged from last year.

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By Julianne Pepitone, CNNMoney.com contributing writer

Can the Big Three make vehicles that Americans want to buy?
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NEW YORK (CNNMoney.com) -- The online holiday shopping season unofficially began Monday, with analysts expecting a flat performance versus last year in the face of the weak U.S. economy.

One prominent cyber-shopping site, Pricegrabber.com, said traffic was up 10% from a year ago.

A report from online research firm comScore (SCOR) predicts that sales for the November-December holiday season will be unchanged from last year, at $29.2 billion.

"Cyber Monday," the first weekday after the Thanksgiving weekend, usually sees the first spike in online spending habits for the holiday season. That's in part because people are shopping from work, after being off for the Thanksgiving holiday - comScore said purchases from work account for approximately half of all online spending.

Historically, Cyber Monday has been a bellwether for the overall performance of the online holiday shopping season, the firm said.

"Cyber Monday may well prove to be an important indicator of whether the decline in spending that we've seen during the first few weeks of the online holiday season will continue for the balance of the year," said comScore chairman Gian Fulgoni.

So far this holiday season, comScore said online sales were down 4% from last year. That's despite a 2% year-over-year increase for Thanksgiving Day and Black Friday - the unofficial brick-and-mortar store start to holiday shopping - combined.

"With so much volatility right now in the variables that influence consumer spending, predicting where this online holiday season will end up has been far more challenging than in previous years," said Fulgoni.

Increased traffic, decreased profit?

Many e-retailers slashed prices to lure consumers, so the forecasts could be disappointing for some.

"Those discounts are going to increase traffic for sure," said Dan Howard, marketing professor at SMU Cox School of Business in Dallas. "But what you have to look at in terms of fundamental economics is that it drives traffic but decreases profitability."

Still, Howard said he thought retailers did the right thing.

"I don't think those deep discounts were a mistake," Howard said. "The consumer mood was so dark and so bleak prior to Black Friday. The [retailers] had to have a stimulus."

After being "overly optimistic" about Black Friday, Howard said he has scaled back his holiday season forecast to about a 1% increase from last year.

Pricegrabber: 'Hopeful'

One online merchant, Pricegrabber.com, said that traffic as of 9:30 a.m. ET Monday was up about 10% over the same time period last year. On Black Friday, the site's traffic increased 11%.

Ron LaPierre, Pricegrabber.com's president, said he was heartened when a company survey this year revealed 55% said they would spend a majority of their holiday shopping budget online - a 10% increase from the previous year.

"There's been so much uncertainty this year," LaPierre said. "No one knew what direction the economy would take. Our season got a late start because the presidential election took some mindshare from the consumers. But traffic increased [the] Friday after the election."

LaPierre said he was "hopeful" for his company's profit this season, looking forward to more high-selling days.

"Traditionally, the first two Fridays in December are some of our biggest days," he said. "And Cyber Monday is our biggest selling day. I think we should keep this momentum throughout the season."

Pricegrabber has seen the biggest growth in practical products such as clothes, appliances, and other home goods. In the company survey, LaPierre said, 66% of users said they would be giving mostly practical gifts.

So far this season, Pricegrabber's best-selling five products are: Nintendo Wii console; Ugg boots; Sony Blu-ray players; Nintendo Wii Fit, and Samsung's 52" LCD TV.

Jana O'Leary, a Target (TGT, Fortune 500) spokeswoman, said the retailer expected its Web site traffic to increase 40% over last year.

O'Leary cited a few reasons for the company's predicted traffic increase, including the wider offering of free shipping.

"Customers seem to be more attuned to where are the best deals, where can I get the best value more than in previous years," noted Tom Aiello, division vice president of Sears Holding Co (SHLD, Fortune 500).

He said both Sears.com and Kmart.com fared well on Cyber Monday. "It was comparable to last year's numbers," said Aiello, without providing specific figures.

Sally Fouts, a spokeswoman for Amazon.com (AMZN, Fortune 500), said the company does not release traffic information, but "I can tell you there are a lot of people shopping." To top of page

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