October 30, 2007, 12:00 AM

As store sales hit the brakes, retailers look for holiday cheer online

Although this year’s holiday shopping season won’t be a sleigh ride through the park for retailers overall, merchants in the online channel will have much to cheer, according to market forecasts from BurstMedia and Forrester Research. More than half of Internet users will do at some of their holiday shopping online, as retail web sales reach $33 billion.

This year’s holiday shopping season won’t be a sleigh ride through the park for retailers overall, but merchants in the online channel will have much to cheer, market forecasters are saying.

“Consumers are flocking to the Internet and the web is now an integral part of their holiday season shopping,” says Jarvis Coffin, CEO of BurstMedia, an advertising network focused on serving specialty web sites. “While spending plans for the holiday season may be lower, the Internet retail space will still experience a huge influx of holiday consumers and their spending dollars.”

Indeed, recent forecasts on holiday spending say the online channel will show strong growth this year and help retailers compensate for economic worries among consumers that are expected to cause sluggish growth in stores.

Spending more online

Despite the 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 Inc. predicts in a recent study, “Outlook for U.S. Online Retail: Holiday 2007.”

Online retail sales will reach $33 billion during the Thanksgiving-to-Christmas period, up from about $27 billion last year, Forrester says. It adds that 11% of consumers say they will do 75% or more of their holiday shopping online.

A report by BurstMedia notes that more than half, or 50.7%, of Internet users will do at least some of their holiday shopping online this year, up from 37.6% last year.

The positive forecasts for the online channel become even more important when compared to overall retail spending projections. Forrester’s forecast of 21% growth in online spending this year is slightly less than the 23% increase in online holiday spending in 2006 over 2005, but 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.

But online retailers still face challenges going into this year’s holiday season. (See Internet Retailer survey, p. 55.) Forrester notes, for instance, that 20% of online consumers say they plan to spend less online because of economic worries. Its study was based on a September 2007 survey of 2,521 U.S. online consumers.

BurstMedia adds that 25.6% of online consumers expect to reduce overall holiday spending this year, while only 16.8% plan to increase it. Its study, also done in September, was based on a survey of 2,400 online consumers.

Holiday tips

Forrester offers the following points on what online holiday shoppers will look for this year:

- 61% prefer to shop an e-retailer that offers free shipping, though 49% say shipping prices won’t deter them from buying online. 26% say they would pay for expedited delivery, down from 45% a year ago.

- 55% say a big reason they shop online is to find products they can’t find offline.

- 18% would pay extra for gift wrapping or a gift box, down from 33% last year.

- Apparel and accessories lead online spending plans, at 80% of online consumers, up from 71% last year; followed by books, 76%, up from 61%; consumer electronics, 69%, up from 55%; gift cards, 18%, up from 9%; and toys, 17%, up from 13%.

To better understand online shopping behavior, Burst Media provides the following insights from its survey:

- 68.6% of Internet users shop online and use the web to research products. But among these consumers, 50.6% only window shop online to research and compare brands and prices, and find store locations, while 49.4% research and buy online.

- Use of the web as a shopping research tool rises along with household income: among households with total income of $75,000 or more, 81.6% research online; $35,000-$74,999, 73.1%; less than $35,000, 62.3%.

- 70.7% of online shoppers cite credit card security as the biggest impediment to buying online. Other concerns are the privacy of personal information online, cited by 60.8%; shipping costs, 64.6%; product quality, 52.4%; return policies, 45.9%; delays and other shipping issues, 45.8%; and product availability, 34.8%.

paul@verticalwebmedia.com

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