October 16, 2007, 12:00 AM

Forecasters predict a happier holiday selling season online than off

Forrester Research predicts online retail spending will grow 21% over last year, while the National Retail Federation predicts overall retail growth will be only 4%. Forrester says consumers expect free shipping and will spend more on gift cards.

Don Davis

Editor in Chief

Despite economic uncertainty, U.S. consumers will spend 21% more online from Thanksgiving to Christmas than they did during the holiday period last year, Forrester Research predicts in a forecast released today. While that would be slightly less than the 23% increase in online holiday spending in 2006 over 2005, it figures to be far better than growth in store sales as the National Retail Federation predicts overall holiday retail sales will grow only 4% this year.

Online retail sales will reach $33 billion during the Thanksgiving-to-Christmas period, Forrester says, up from about $27 billion last year. 11% of consumers say they will do 75% or more of their holiday shopping online, Forrester says, citing data from an online September survey of 2,521 U.S. consumers.

20% in the Forrester survey say they will spend less online because of uncertainty about the economy. In a separate survey by NPD Group Inc., only 5% of U.S. consumers say they plan to spend less overall for holiday gifts. NPD also found 41% of consumers plan to put off starting their holiday shopping until after Thanksgiving, 10% more than said so last year, a sign consumers know they can find better deals the closer it gets to Christmas, says NPD analyst Marshall Cohen.

The Forrester survey suggests shipping costs are a big issue for online consumers, with 61% of respondents saying they are more likely to shop with an e-retailer that offers free shipping. In response to a separate question, 49% agreed that “shipping prices often deter me from buying online.” Product variety also seems to drive consumers to e-commerce sites, with 55% agreeing that “I often find products online that I cannot find anywhere else.”

Consumers tell Forrester they are less inclined this year to pay for frills. Only 26% say they would pay for expedited delivery, versus 45% in the Forrester survey conducted in September 2006. Only 18% say they would pay extra for gift wrap or a gift box, down from 33% last year.

Apparel and accessories is the most popular online shopping category, with 80% of consumers saying they plan to buy such items on the web this year, versus 71% last year. 76% plan to buy books online this year, versus 61% last year, and 69% consumer electronics, up from 55% in the 2006 survey. The biggest increase in spending plans is in gift cards and certificates, with 18% planning to spend more this year, versus 9% last year. Many kids should have a happy holiday, as 17% say they plan to spend more online on toys, versus 13% last year.

Sucharita Mulpuru, author of the Forrester report “Outlook for U.S. Online Retail: Holiday 2007”, says retailer should recognize that the variety of products online is an important driver for sales and consider guiding web site visitors through top gift ideas. She also says many consumers appreciate payment alternatives to credit and debit cards, and suggests retailers that offer other ways to pay let consumers know that early in the shopping process, such as on the home page or on product detail pages.

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