Impact of the Economic Bailout on E-Commerce

Today, the United States House of Representatives passed the widely discussed “Bailout Bill” as an attempt to conduct damage control within Wall Street.   The verdict is too early to determine exactly how much positive impact the bill will have for the U.S. economy, but plenty of people have voiced their opinions.  So, this article simply adds ingredients to the proverbial soup of mixed attitudes that make the USA a hearty meal.  In the spirit of personalizing an otherwise macroeconomic issue, let’s take a close look at what the bailout means to online retailers.

Ideologically speaking, people stand on two sides of the economic bailout fence:  individuals who are concerned about the cascading, rippling decline of credit and lending institutions, and those who argue that the marketplace should remain private without government intervention.  Either way, there is an unquestionably direct impact on e-commerce sales.   Perhaps one of the better ways to gauge the current economic impact on e-tailers is by understanding the Consumer Confidence Index (CCI).  In September, the CCI was at 59.8, which is roughly only half what it was the same period last year.    Consumer confidence reflects the attitudes and perceptions of households related to personal spending habits.   That being said, the typical citizen hasn’t had a promising view of the U.S. economy for quite some time.

Perhaps complicating or even exacerbating the challenge of consumer sentiment is a recently passed economic bailout bill designed to absorb the financial ruin of risky lenders and equally risky borrowers.  Naturally, a $700 billion invoice doesn’t get paid the next day, unlike the typical office lease or re-stocking inventory purchase known to retailers.  Therefore, convincing the public to assume an unprecedented debt of this magnitude requires the kind of bi-partisan efforts recently displayed within the U.S. Senate, and later the House.  A strong command of economic jargon and appeal to fear of the unknown has catapulted the news media into a frenzy of what-ifs.  Unfortunately, little time was spent to check the overall barometer of voter attitudes.

Bottom line, the economic bailout does an effective job of inflating the U.S. dollar.  The Federal Reserve must inject new currency, all of which includes interest payable by the United States.  For every new U.S. dollar introduced to global markets, the actual value of said dollars is considered both domestically and abroad.  This inflationary spending directly impacts cost of goods sold by online and brick-and-mortar retailers.

Declining consumer confidence levels and devalued U.S. dollars results in fewer customers purchasing increasingly expensive products online.   E-tailers must double their efforts to mitigate the impact of the $700 billion dollar economic bailout generously given to Wall Street.  Otherwise, there may be no more value in the U.S. dollar to bail out future online retailers, as well.