Retailers Find Success with Internet and Social Media, But Does this kind of Shopping Improve the Economy?

With the economy down and Internet use up, the media has reported that online buying may be retailers hope for the holiday shopping season. However, does online shopping and social media promotions really have that big of an impact on a company's income and does this kind of shopping actually help the economy?

This Cyber Monday many stores offered discounts to online shoppers and they worked, more customers than ever came. Online sales grew 16 percent from last year according to online marketing firm Coremetrics. The entire Thanksgiving weekend struck success for online sales. Discounts spurred an 11 percent jump in online sales on Black Friday and a 10 percent increase on Thanksgiving according to research firm comScore. The whole month stood out for online purchases where online sales were up an average of three percent. This shows that customers are appreciating retailer's online discounts and creative promotions.

Big retailers such as Toys R Us and Best Buy are using the web, especially social media sites Facebook and Twitter to direct buyers to discounts this year. Companies are using special codes for online coupons. This makes this method very easy to track its effectiveness.

Lately every company seems to be jumping on the social media bandwagon. More companies created holiday social media plans this year than ever before:

• 47 percent of retailers planned to increase social media use for the holidays
• 75 percent will improve their Facebook pages
• 59 percent will boost their Twitter use
• 60 percent of consumers will use social media to locate coupons and discounts
• 53 percent will research gift ideas through social media

Source: Deloitte Services, National Retail Federation

Online sales only represent a small portion of retail sales, estimated to be only between 4 and 7 percent of a retailer's overall income. Overall, holiday sales will not be greatly affected by e-commerce. According to the National Retail Federation, in 2008, Americans spent $141 billion online. In stores, we spent $2.4 trillion (excluding auto, food, gas and beverage). Overall, holiday sales will not be greatly affected by e-commerce.

Perhaps no web retailer has been as effective in driving consumers to their site as Amazon. The company did not even feel the recession last year when they reported having one of their best holiday seasons ever. Their fourth-quarter revenue rose by 18 percent to $6.7 billion last year.

Even with a slight increase in retail sales from in store sales, the National Retail Federation, the largest trade group predicts a one percent drop from last year (excluding online) in shopper sales.

Even though online shopping increases a store's revenue, it doesn't exactly improve the economy. According to the Minnesota Department of Employment and Economic Development, there are more than 15 million Americans working in retail jobs. In Minnesota, nearly 300,000 are employed in the retail sector. If we shifted to all online shopping, we'd kill jobs in the retail economy. There would also be a cost to jobs at restaurants and other businesses that surround our major retail centers. The states would lose out on considerable sales tax revenue, as well. Minnesota's House Research estimates that the state loses $50 million in a two-year period due to unpaid sales taxes. By law, retailers with physical stores in Minnesota have to collect sales taxes at the time of purchase. Retailers without a physical presence do not have to collect taxes. Individual residents are responsible for self-reporting Internet purchases if the resident purchases a total of $770 a year.