• The Wall Street Journal , Monday, December 29, 2008 11 AM

Online retail sales may have held up better than expected during the holiday shopping season, but The Wall Street Journal says that this year is still likely to go down as one of the worst on record for the e-commerce sector. Online spending was down 2% year over year from Nov. 1 through Dec. 24, compared with a 5.5% to 8% drop for the overall retail market, but the bigger problem was that purchases were consolidated around big retailers like Amazon, Apple and Wal-Mart, leaving smaller online retailers in the dust.

A 2% drop in sales might not sound like a lot during a recession, but the Journal reminds us that this is a sector that historically increases 20% annually. As John Aiken, managing director and head of equity research for Majestic Research, says, ecommerce sales were "not amazing by any stretch."

EBay, for example, saw its traffic drop by 16% between early November and mid-December, while Best Buy saw a 17% decline, according to comScore. The Journal says that the few sites that did benefit relied heavily on discounts, special promotions, and targeted marketing campaigns. "Consumers are hyper-price sensitive in this environment," Aiken says, adding it isn't clear whether they will keep spending as the promotions taper off into next year.

Read the whole story at The Wall Street Journal »