October 2, 2012, 8:28 AM

Online holiday sales will increase 12% this year

Web retailers will sweeten free shipping, Shop.org says.

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Retail web sales will increase 12% over last year’s holiday shopping season and reach between $92 and $96 billion, Shop.org, the digital division of the National Retail Federation trade group, says in its inaugural online holiday sales forecast released today. The forecast covers shopping during November and December.

Shop.org uses data from the U.S. Department of Commerce, the U.S. Federal Reserve, U.S. Census, The Conference Board business research group, and NRF calculations for its online sales forecast. Data include personal income and spending, consumer credit, consumer confidence and previous monthly retail reports. Shop.org’s estimate takes into account kiosk sales in places such as retail stores and airports; home shopping network sales such as those placed via phone at such retailers as the Home Shopping Network; and direct-to-consumer sales via retailers such as Avon.

Online and offline holiday sales this year will increase 4.1% to $586.1 billion, the NRF says in its annual holiday spending report. NRF’s 2012 holiday spending growth forecast is higher than the 10-year average holiday sales increase of 3.5%, but lower than last year’s growth of 5.6%. The NRF uses factors including consumer credit, disposable personal income, and previous monthly retail sales releases for its holiday retail sales forecast.

The trade group says government data show that retailers can expect moderate growth this year compared with recent years. When it comes to web retailers, Shop.org executive director Vicki Cantrell says she expects many will offer some form of free shipping and some will begin offering free returns.

In a survey of 52 retailers conducted by Shop.org after the 2011 holiday season, retailers ranked promotions such as discounts as the top marketing tool to drive sales. Free shipping without conditions ranked second and free shipping with conditions, such as a minimum purchase requirement, came in third. 

Additionally, 57.4% said they would keep their free shipping programs the same this holiday season as they were last holiday season, 29.8% said they would sweeten their free shipping offers somewhat, and 6.4% said they would expand free shipping deals significantly. A further 6.4% said they would offer fewer free shipping offers.

Because free shipping of some sort is becoming more widely used by retailers, Cantrell expects some merchants will go even further by adding free returns or by extending the length of time consumers can return goods purchased over the holidays. “Anytime something begins to become expected, retailers will start searching for the next best thing to offer,” she says.

She adds that while e-mail and paid search will still play a big role in holiday marketing this year, retailers have also been investing in social and mobile marketing programs in preparation for the season. In its pre-holiday poll, 55% of retailers said they had invested in a mobile site since the 2011 holidays, 52.8% in Facebook and 43.4% in Pinterest. She says retailers are using Pinterest to promote wish lists and gift ideas.

“It’s going to be a big mix of old and new,” Cantrell says. “E-mail and search are still going to be big, but some of the top investments that we have seen are in mobile and social.”

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