Online Retail Expected To Grow, Regardless Of Economic ClimateOnline Retail Expected To Grow, Regardless Of Economic Climate

Finally, some good news on the economy: online retail sales will continue to rise, despite predictions of sluggish growth in brick and mortars, according to a recent study.

"From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate, but the fact that online sales will increase substantially this year demonstrates the resilience of the channel and is a testament to the value and convenience most customers find when shopping online," said Scott Silverman, executive director of Shop.org.

Shop.org, a division of the National Retail Federation, announced the results of a study by Forrester Research on Tuesday. It concludes that online retail will increase by 17% this year to $204 billion, with clothing, computers, and cars topping the list of sales categories.

"The State of Retailing Online 2008: Marketing Report," is the first of a three-part series of reports based on the study. It forecasts $26.6 billion in clothing sales, $23.9 billion in computer sales, and $19.3 billion in automobile sales.

Retailers report that search engine marketing drives 35% of sales, making it the best way to attract new customers. Ninety percent of online retailers surveyed said they use pay-for-performance search placement, while 79% said they would place a higher priority on the tactic this year. Companies said that among offline marketing tactics, catalogs and direct mail take priority over television and newspaper ads. Retailers are less interested in promoting free shipping options this year compared to previous years. Eighty-five percent of online retailers said they promoted shipping with conditions before, but only 35% plan to focus more on such promotions this year.

Sixty-five percent of the retailers surveyed said they are eager to experiment with ads on social networks and 55% they would focus more on widgets in 2008. The report stresses that social networking sites help build brands but they are less proven for driving revenue than e-mail marketing and free shipping promotions.

The report found that online retailers set aside 53% of their marketing budgets on acquiring online customers and 21% on retaining online customers. Some tools used to attract new shoppers also serve to retain existing customers, the study found.

Sucharita Mulpuru, Forrester Research principal analyst and lead author of the report, said that online shoppers can be divided into two camps: those who search online for the best price and those who use the Web for convenience.

"More affluent customers appreciate the convenience of shopping online and are not necessarily looking for the best deal," Mulpuru said in a prepared statement. "Retailers would be wise to recognize there are significant opportunities within both audiences and should market to them accordingly."