Channel Adoption Supports Online Holiday Sales Growth

Online retailers have a challenging holiday season ahead, but they can expect growth over last year’s sales. Two reports, the “Holiday 2005 forecast: Addressing the Impact of Macro-Economic Factors on Holiday Online Retail Sales” from JupiterResearch; and “U.S. Online Holiday Sales Bring Good Things to Retailers” from Forrester Research; both forecast double-digit growth over the 2004 holiday season.

The JupiterResearch report forecasts an 18 percent increase over last year to $26 billion in sales for the U.S. market. Sales over the holiday season will aid online retailers reaching the full-year sales target of $79 billion, up from $66 billion last year.

Channel adoption is cited as the main driver for growth this season as more consumers enter the relatively new channel to buy gifts. “The holidays are the perfect time for people to adopt [online retail],” JupiterResearch analyst Patti Freeman Evans told ClickZ Stats. “You’re buying gifts anyway, and many people will already be shipping gifts.”

Increased gas prices may offer an incentive for shoppers to make purchases at home on their computers. Free shipping, offered by many retailers, adds further incentive to shoppers. Evans said retailers are trying to use free shipping as strategically as possible, though to consumers, it’s more important this year than ever.

The Forrester report projects a 25 percent rise in online sales this holiday season. Despite the growth, the report stresses the negative impact offline trends such as high gas prices will have on e-commerce. Shipping companies have added gas surcharges; many of the 79 percent of online retailers offering free shipping will do so only with limitations. Last year, 25 percent of online shoppers added to purchases to meet free shipping thresholds.

Gift cards resonate with shoppers as a way to allow the recipient to ultimately select his own gift. Though gift cards are often purchased online, 37 percent of online shoppers used their gift cards offline versus the just 13 percent who redeemed theirs online, according to Forrester.

Jupiter’s Evans says not all online retailers have the ability to accept gift cards as payment. “Currently [gift cards] are going to drive more traffic offline than online.”

The JupiterResearch report derives information from its Internet Shopping Model, Ipsos-Insight, and a survey of 831 online holiday buyers. Forrester cited information from several of its Consumer Technographics reports from 2004 and 2005. Forrester defines the holiday season as the period between Thanksgiving and Christmas.

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