Zacks Industry Outlook Highlights: Google, eBay and Citigroup
CHICAGO, June 17, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the eCommerce industry, including: Google Inc (Nasdaq: GOOG), eBay (Nasdaq: EBAY) and Citigroup (NYSE: C).
(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
A synopsis of today's Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/55300/e-Commerce+Stock+Outlook+-+June+2011
ComScore has provided first quarter retail ecommerce sales numbers. The firm estimates that sales increased 12% from the first quarter of 2010, representing the second straight quarter of double-digit growth and the sixth straight quarter of positive growth.
Moreover, the unadjusted figures from the U.S. Commerce Department puts total retail sales in the first quarter of this year 1.2% higher than during the first quarter of 2008 (pre-recession), compared to e-retail sales growth of 26.3% during the same time period.
ComScore also stated that the number of buyers increased 7%, the transactions per buyer increased 9% and the value per transaction declined 4%. The data validates our theory that there were a larger number of mobile transactions for lower-value items.
Forrester Research believes that rapid growth in online retail sales in the U.S. will continue to come at the expense of brick-and-mortar outfits. ComScore adds that this increase is mainly on account of the lower prices and convenience of online transactions.
It also stated that high gas prices and a persistently high level of unemployment were driving consumers to increase their online purchases. It is therefore expected that online sales would suffer only slightly even if prices were to go up further.
Free shipping remains a major lure, with ComScore estimating that 61% of customers were somewhat likely to cancel their purchases in its absence. Overall, 47% of purchases in the last quarter included free shipping, compared to 49% in the previous quarter (which was also the holiday season).
Total retail e-commerce is currently 8.6% of total retail sales, according to ComScore. Forrester Research estimates that this share will go up to 11% by 2015. 2011 is expected to see a 12% growth in the U.S. and a 13% growth in Europe.
Travel
The U.S. Commerce Department expects the overall travel market to grow at an average rate of 6-8% from 2010 to 2016, with China, South Korea, Brazil, Russia and India, in that order, expected to be the largest contributors. All of these countries, with the exception of India, are expected to grow at triple-digit rates, while India is expected to grow at just under a triple-digit rate. Travel and tourism is one of the country's strongest industries, contributing a trade surplus in each of the last 20 years.
According to a report by PricewaterhouseCoopers, the improving economy will result in a 3.2% increase in demand for hotel reservations, which along with a 0.6% increase in hotel supply will lead to higher occupancy rates (59% expected in 2011 compared to 57.6% in 2010). This will also raise hotel rates by 5.1%.
According to eMarketer estimates, US online sales of leisure and unmanaged business travel will increase 8.5% this year. eMarketer believes that the increase in spending is mainly on account of higher airfares, hotel rates and ancillary fees, which increase the aggregate dollar amount of online bookings. Booking through mobile devices is expected to grow significantly, with 11.8 million new users.
However, another report by PhocusWright mentioned that when online penetration of the travel market reached 35% in any country, growth rates were likely to slow down to single-digits. The research firm mentioned that only the U.S., U.K. and Scandinavia had reached this level of penetration and most other markets across Europe, Asia and Latin America would continue to show good growth rates.
Payment Systems
The most recent development in payment systems is Google Inc's (Nasdaq: GOOG) digital wallet, which allows a customer to make a payment by waving his mobile phone over a POS terminal. While the near-field communication (NFC) technology used in the system is already in use in some parts of Europe, the concept is relatively new to the U.S. Other than convenience, the main attraction being highlighted is the security of the payment channel, since neither the customer nor the retailer would be recording the personal information related to the customer.
Adoption of the device, although it is a ways off, will have a remarkable effect on the volume and value of mobile transactions, since it should increase the percentage of higher-value sales through the mobile platform.
The digital wallet is a great improvement over eBay's (Nasdaq: EBAY) existing payment system, Paypal, which takes away a significant percentage of earnings from the retailer or person providing the service. Moreover, although the system is itself secure, there is always a security risk for a buyer not used to dealing with Paypal, since it requires that you provide personal information.
Traditional payment systems (from banks) also realize that people are now spending more time online and have therefore stepped up their investments in related IT. The results of a survey by the American Bankers Association (ABA) show that U.S. consumers are increasingly going online.
More than 35% of consumers questioned in the middle of 2010 felt that the Internet method of banking was their most preferred, a significant increase from 2009, when 25% felt that the Internet was their most-used method. Moreover, Internet banking is the most preferred for age groups below 55 and the second-most preferred for age groups above that. Preference for ATMs continues to decline.
eMarketer reported that a Novantas study showed a similar shift in customer preferences. According to that study, the percentage of customers transferring funds online went from 34% in 2005 to 67% in 2010, product research through the Internet went from 46% to 77%, while balance checking went from 44% to 76%. However, according to an Emphatica study, mobile banking has not picked up sufficiently in either the U.S. or Canada, due to security-related concerns.
Security
With online transactions expected to boom over the next few years, the top-most concern remains security. While banks will spend significantly on secure payment systems, hackers are expected to have a field day, largely targeting the flood of customers going online. The recent data breach at Citibank, a part of Citigroup (NYSE: C), is testimony of this fact.
Alternative payment systems will continue to gain popularity. While some of these payment systems, such as eBay's PayPal have been around for awhile, other systems such as Google's digital wallet are still in the making. Alternative payment systems never really gained momentum in the past because of the low volume of transactions. However, as online transactions continue to increase, many more such systems could suddenly become more available.
We expect mobile security to become a major focus area for technology companies, since this is the stumbling block to payments through the mobile platform (currently just 2% of U.S. online spending). Additionally, hackers continue to multiply and data breaching has become commonplace.
Online Advertising
The U.S. online advertising market has seen some very strong growth in the past few years, despite the recession that impacted the entire economy. eMarketer estimates that the market will grow 20.2% in 2011 to $31.3 billion, compared to the 14.9% growth witnessed in 2010.
However, growth rates are expected to drop over the next few years: 17.6% in 2012, 12.0% in 2013, 10.4% in 2014 and 8.8% in 2015. Falling growth rates notwithstanding, the share of online ad spending in total ad spending is expected to increase from 20% this year to 28% in 2015. By contrast, TV ad spending is expected to remain steady at around 38% throughout.
The current strength in online advertising is coming primarily from the growing popularity of the display format. Of all the forms of online advertising, display (including video, banner ads, rich media and sponsorships) is expected to see the strongest growth over the next few years, overtaking search by 2015. It is already pretty close on the heels of search ($9.91 billion in 2010 compared to $12.0 billion for search).
The lower pricing of video and banner ads has made them popular with brand advertisers, so ad inventories are solid. eMarketer expects that 39.4% of ad budgets will be devoted to branding in 2011, fueling growth in display ads. Facebook is also expected to have a significant impact.
The underlying drivers of growth are the continued increase in the number of users, greater propensity of users to consume online, a growing inventory of advertisements that serve to lower advertisement prices and the push into display advertising.
Search advertising is expected to remain popular, however, because results are measurable, and therefore, more predictable than other media. This also makes the market more resilient in recessionary conditions, since advertisers are more confident about the results of their spending.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today by visiting http://at.zacks.com/?id=2679.
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD from MIT Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=4581.
Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com
SOURCE Zacks Investment Research, Inc.
WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?
Newsrooms &
Influencers
Digital Media
Outlets
Journalists
Opted In
Share this article