Bogus Trend Story of the Day: The Times discovers online sales losing "steam."

Media criticism.
June 18 2007 6:05 PM

Bogus Trend Story of the Day

The Sunday New York Times discovers online sales losing "steam."

Illustration by Mark Alan Stamaty. Click image to expand.

Nothing lives up to our expectations. My parents. Your children. Television season finales. Yesterday (June 17), the New York Times located its disappointment in Web-based retailing in a 1,200-word, Page One piece titled "Some Buyers Grow Web-Weary, and Online Sales Lose Steam."

The lede of the article asks, "Has online retailing entered the Dot Calm era?" The story answers resoundingly, "Yes." 

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The Times finds consternation in the fact that since the Web commerce got started, annual online retail sales have grown at about 25 percent. But those overall rates are slowing, the paper reports, and market-research firms project further slowing. The Times quotes a Jupiter Research finding that online retailing's growth rate has peaked and will slow to 9 percent a year by the end of the decade.

The Times presents a few bogus anecdotes to explain the slippage, including "Internet fatigue" on the part of consumers who are "changing their buying habits." A shopper tells the Times that he now prefers real stores to online ones because of better lighting and better service. His example: Book Passage in downtown San Francisco. The shopper's wife—who just happens to be an executive at the brick-and-mortar department store Macy's—says shopping online is "much more of a task." What else would she say?

The piece provides additional evidence to account for online's decline. Dell now sells computers at Wal-Mart, it reports. Gone unmentioned is the fact that Dell sold PCs at Best Buy, Costco, and Sam's Club as recently as 1994, according to this Times article from one year ago. Another anecdote: Expedia.com has "almost tripled" its number of ticketing kiosks in hotels and other touristy spots. It could be a terrific supporting statistic if the story included the base number of kiosks that have been almost tripled, which it doesn't. The most bogus anecdote claims that "Borders … recently revamped its Web site to allow users to reserve books online and pick them up in the store." There's nothing "recent" about that service. Borders spokeswoman Anne Roman says via e-mail that the book chain has given customers the option to reserve books online and retrieve them in stores since November 2002.

One hallmark of a bogus trend story is the "to be sure" passage that undercuts the story's entire thesis. This piece has two. In the fourth paragraph, the Times reports that Internet sales are projected to top $116 billion this year, "making it harder to maintain the same high growth rates." In other words, Web retailing is totally huge, it's still growing by leaps and bounds, but the bigger a fast-growing thing becomes—online sales, giant squid, or an algae bloom—the harder time the thing has sustaining 25 percent annual growth. If no industry can sustain 25 percent annual growth forever, why is it Page One news that the very healthy business of online retailing can't either?

The second "to be sure" passage comes in the final paragraph, where a Berkeley economics professor turns the piece upside down as he raves about the growth potential of online retailing. Online commerce constitutes less than 1 percent of the overall economy.

"There's still a lot of head room for people to grow," says John Morgan of Berkeley's Haas School of Business *.

Addendum: My "financial adviser" offers these observations: The economy grows about 3 percent in real terms per year, or about 5.5 percent to 6 percent in nominal terms. So, anything that's growing faster than that is growing faster than the economy as a whole. Online sales, even if their growth rate would fall to 9 percent, would still be growing much faster than the economy (and hence other retailers as a whole). Wal-Mart has sales of a few hundred billion dollars (i.e., about three times the size of the Internet retailing space). Its same-store sales are basically flat, rising about 1.5 percent to 2 percent—in real terms, they're shrinking. Online sales are continuing to grow impressively in both absolute and real terms. Even if they  grow only 6 percent a year, they will still grow nicely and take market share from bricks-and-mortar outlets.

******

Or maybe it's me. Maybe I'm the one who has grown Web-weary and lost steam. Send your assessment to slate.pressbox@gmail.com. (E-mail may be quoted by name unless the writer stipulates otherwise. Permanent disclosure: Slate is owned by the Washington Post Co.)

Correction, June 19, 2007: The original version of this piece misspelled "Haas." (Return to the corrected sentence.)

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