The Winners and Losers of the Recession's Online Shopping

The economy isn't getting better, but people are still shopping

The economy hasn't recovered, but that hasn't stopped people from getting their shop on--this is consumerist America, after all. When the market tanked, buying slowed, but a lot of the purchasing that did happen migrated online, explains The Wall Street Journal's Stu Woo. "More people are shopping online than ever, partly because many consumers shifted their spending online during the recession." Online sales are predicted by a Forrester analyst to rise 11 percent in 2011, continues Woo.

Shoppers headed to the Internet to find the best deals. From flash-deal sites like Gilt Groupe and Groupon to more old school retailers like Amazon.com, shopping has turned virtual. But it turns out that not all online retailers are equal. After over two-years of recession, certain Web models have succeeded while others are floundering.

The tanking economy changed consumer spending habits, and high-end flash deal sites like Gilt Groupe preyed on the shopping addictions of Americans with money, explains The New York Times' Clair Cain Miller and Jenna Wortham. "People still want to shop, but in the privacy of their homes," Susan Feldman, a founder of home decor deal site One Kings Lane told Miller and Wortham. "They just don’t want to be seen walking down the street carrying a Bloomingdale’s or Barneys or Bergdorf bag."

Two years later, things aren't looking as hot for these sites, explains The New York Times' Clair Cain Miller, in a more recent piece. "The whole raison d’être of this flash-sale business is that it was highly lucrative," Sucharita Mulpuru, an e-commerce analyst at Forrester Research told Miller. "That didn’t turn out to be a reality."

If the market tanks again, people might come back to these sites, which allow people to indulge even as unemployment climbs above 9 percent, but in the meantime Gilt Groupe has fallen back to a more traditional online retail model, launching a full-price men's clothing site Park & Bond. "They’re doing what was the whole danger of the retail business in the first place--investing in inventory--and that’s the part that’s a little unintuitive here," Ms. Mulpuru explained to Cain. "I wouldn’t say it smacks of desperation, but it’s definitely an attempt to figure out how they can pivot and change their business model because the first one didn’t work out as they planned."

But maybe the traditional retail model is exactly where Gilt should go for increased revenue, adds Wu. "Today, analysts say online-only outlets such as Amazon.com Inc. and eBay Inc. may be even better poised to weather another economic slump."

Or perhaps they shouldn't shed their niche appeal. While flash sites look more like a mainstream online retailer, penny-deal sites, which allow shoppers to bid one cent at a time for items, have proliferated, explains The Wall Street Journal's Ann Zimmerman. "Whether a harmless form of retail entertainment or an unregulated form of gambling, penny auctions are growing. The sites now number 165, according to Technology Briefing Centers, which provides research to the financial-services industry." Whether the economy gets better or worsens, people will continue to shop online, just the way they go about doing it might change.