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Online Sales Remain Strong: NRF

4/08/2008 03:21:00 PM Eastern

Scottsdale, Ariz. — E-commerce appears better poised to weather the slowdown in consumer spending than other retail channels this year.

According to the National Retail Federation (NRF), online stores will continue to be a bright spot in the retail industry, with revenue rising 17 percent this year to $204 billion.

The rosy projections come from The State of Retailing Online, an annual study of 125 retailers conducted by Forrester Research for the trade association’s Shop.org division.

“From higher shipping costs to changes in consumer shopping habits, online retailers are not immune to the current economic climate,” said Scott Silverman, executive director of Shop.org. “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.”

Underscoring the health of the channel, Amazon.com said on April 8 that it will add 500 full-time positions at its three fulfillment centers in Hebron, Ky., to support growing customer demand.

“As we continue to expand selection for customers across all product categories, we are hiring … to help us accommodate current and future demand,” said Connie Wendzicki, Amazon’s Eastern regional director of fulfillment.

“What’s spearheading online retail sales growth is a tale of two shoppers that visit the Web for very different reasons,” said Sucharita Mulpuru, Forrester Research principal analyst and lead author of the Shop.org report. “The casual shopper goes online to look for the best price, leveraging the transparency of the Internet to save money. However, more affluent customers appreciate the convenience of shopping online and are not necessarily looking for the best deal. Retailers would be wise to recognize there are significant opportunities within both audiences and should market to them accordingly.”

According to the Shop.org survey, search engine marketing continues to be the most effective way to reach new customers, citing 35 percent of sales coming from that initiative. As a result, most online retailers surveyed (90 percent) use pay-for-performance search placement, and 79 percent said they will make this tactic an even greater priority this year. Companies are also using offline marketing tactics to drive customers to the Web, with catalogs and other direct mail pieces taking priority over methods like television and newspaper advertising.

The study showed retailers are less interested in promoting free shipping options this year. While 85 percent of online retailers said they used some shipping with conditions promotions in the past, just 35 percent said that they would focus more on these types of promotions in 2008. Instead, 65 percent of retailers they would increase their focus on social network advertisements and 55 percent would consider employing widgets to attract customers this year.

However, the report advises retailers to continue investments in proven techniques like email marketing and free-shipping promotions to drive sales.