Pinching Pennies Online

When I draw a chart, I start with a hypothesis. In studying online shopping's relationship to our shaky economy — from high oil prices to the housing crisis and talks of recession — I expected that a chart of visits to online retailers would show a precipitous decline. According to the latest Reuters/University of Michigan Consumer Index, consumer confidence has reached the lowest level in 28 years.

Yet the facts show that my hypothesis is completely wrong: Visits to online shopping sites are up compared to the previous year. Perhaps the increase could be explained by consumer price sensitivity. In the same University of Michigan Consumer Index report, consumers expect an inflation rate of 5.6% over the next 12 months. Here's a new hypothesis: when economic times get tough, online shopping sites become an important tool to help consumers find the best price on potential purchases.

The Hitwise Retail 100 Index (a collection of the top online retail Websites) reveals that visits to the collection increased 10.1% from the same period in 2007 to now and over 16.4% from 2006. Examining retail — from electronics to apparel and books to music, the category growing the fastest is sites that help us compare prices across multiple shopping sites. Online comparison shopping engines such as Shopzilla, Shopping.com and Pricegrabber, have, as a category, increased at a rate of 59.9% over the previous year.

The way we search online can provide invaluable insight into our economic state of mind. One big change in search term usage in the online retail sector is "new" versus "used." The volume of searches that contain the term "used" in search queries has increased 21.8% since the beginning of the year, indicating that people are using the Internet as a means of locating price savings over "brand new." This change in consumer behavior is also apparent in the individual domains with the greatest increases in traffic over the last year. The online classifieds website Craigslist.org is up 93.4% comparing the week ending May 31, 2008 to the same time period in 2007.

While the data doesn't show is if all this increased searching correlates with increased buying. But it does show a dramatic change in how people are thinking about shopping and inching ever closer to a wired, price-conscious ideal.

Bill Tancer is general manager of global research at Hitwise.