In the Face of Flat Holiday Season, Online Sales Continue to Rise

While retail sales are likely to remain flat or dip this holiday season, online sales will actually grow 8 percent, according to a new report from Forrester Research. In its “U.S. Online Holiday Retail Forecast 2009,” the research company predicted online retail sales will reach $44.7 billion in the months of November and December.<br clear="none" /> <br clear="none" /> Despite this boost, the percent increase is substantially less than the year-over-year growth seen in years past. Excluding last year’s modest increase of 5 percent, between 2003 and 2007, online retail sales were up between 20 and 31 percent annually. <br clear="none" /> <br clear="none" /> The growth hinges on several advantages that shoppers see with online buying versus visiting a store. Sixty one percent of online consumers said they like shopping online because they can find products that are unavailable elsewhere, per Forrester’s North American Technographics survey conducted in the third quarter. More than half of respondents (52 percent) said they are better able to compare features and prices online than in-store.<br clear="none" /> <br clear="none" /> “You can and find whatever the deals are for any retailer out there, be it free shipping, or 30 percent off or whatever,” said Mike Kraus retail adviser for Kraus also points to “shopping aggregator” sites that help consumers find what the cheapest price is for any given product or brand. “If you know what you’re looking for, shopping online is absolutely the way to go.”<br clear="none" /> <br clear="none" /> The Technographics survey also found that 33 percent of respondents said they will do more research online before purchasing. The Web has become the go-to place for deals and discounts, including free shipping and coupons, but the report emphasized that retailers will also be protecting their bottom line by offering these deals for limited time or in limited quantities. It also predicted that social shopping online tools will grow as well as enhanced online merchandising tools such as American Eagle Outfitters’ virtual closet or J. Crew’s “shop that look” display.<br clear="none" /> <br clear="none" /> Some online retailers are more likely to see growth than others. A recent survey of retailers that Forrester conducted with indicated that of the companies reporting year-over-year sales decreases, 39 percent were small companies, while only 17 percent were medium-sized and 21 percent were large. Mass merchandisers like WalMart are predicted to do well online. It also predicted that categories such as apparel and accessories will perform better than home goods.<br clear="none" /> <br clear="none" /> “For certain product lines, it’s a very substantial part of the business,” said Eugene Fram, Emeritus Professor of Marketing of Rochester Institute of Technology's E. Philip Saunders College of Business. He cites such Web-savvy brands as Amazon and Barnes & Noble, as well as software companies, as likely to see continued online sales strength. <br clear="none" /> <br clear="none" /> At the same time, Fram downplays the significance of the forecasted online growth, pointing to the small proportion of total sales that online sales account for. “An 8 percent increase in terms of retail sales is not a particularly meaningful statistic in the long term. At some point, unless buying habits change radically, it will probably level off.”