September 30, 2008, 12:00 AM

Online retailing a bright spot amid a struggling economy, report says

Despite a tough economy, online retailers are expecting average annual growth this year of 25%, and 35% say they expect to perform better than initially expected through the first half of next year, according to the “State of Retailing Online Profitability, Economy and Multichannel” report released in September by Shop.org and Forrester Research Inc.

Online retailers are expecting average annual growth this year of 25%, and 35% say they expect to perform better than initially expected through the first half of next year, according to the “State of Retailing Online Profitability, Economy and Multichannel” report released last month by Shop.org, the online retailing unit of the National Retail Federation. The study is based on a survey by Forrester Research Inc. of 125 retailers in June and July 2008, when respondents were asked about their plans and expectations for the following 12 months.

5% of respondents said they believe their online businesses will perform substantially better than expected during the coming 12 months, 30% said slightly better than expected, 33% the same as expected, and 32% slightly worse than expected.

Retailers reported positive trends in conversion rates and profitability, though many still face challenges in selling across channels including the web, stores and catalogs, the study says.

81% of respondents said their e-commerce business was profitable in 2007, and 75% said e-commerce was more profitable in 2007 than in 2006.

Many retailers are still struggling to increase sales by integrating order and inventory systems and coordinating marketing and merchandising efforts across channels, the report says. The report notes that many retailers continue to operate each retail channel as a separate silo and have not been able to justify investments in multi-channel systems. 51% of respondents indicated, however, that their online customers are active in at least one other retail channel.

paul@verticalwebmedia.com

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