Will Online Sales Brighten a Bleak Holiday Season?

As retailers brace for penny-pinching shoppers this holiday season, they're hoping their websites can deliver some good news. At the very least, the Internet should outdo the sidewalk in delivering sales growth: holiday forecasts predict zero to 2.2% overall sales gains for November and December, according to respective estimates by Bain & Co. and the National Retail Federation (NRF), the world's largest retail trade association. By comparison, online retail sales are expected to grow 12%, to $44 billion, according to Forrester Research.

Shoppers are migrating to the Web for a variety of reasons. Rising financial anxiety and tight credit availability are making holiday shopping this year an exercise in self-restraint, and the Web offers a quick, clean shot at purchasing 24 hours a day. Moreover, with websites like FatWallet and SlickDeals featuring bargain-basement prices, hunting around for the best value is a convenient mouse click away. That's an easier proposition for many than slogging to the mall and fighting traffic, crowds and parking problems. "Comparison-shopping online dwarfs what you can do in the real world," says Nita Rollins, a trends expert for digital marketing agency Resource Interactive. "You just open up six browsers." (See the 50 best websites of 2008.)

Retailers are also discovering that by making their Web experience hassle-free and user-friendly, they can achieve better sales. That's why 42.9% of merchants have improved their search function, 42.6% have added or enhanced product videos and 32.7% have included customer reviews to help shoppers make buying decisions, according to Shop.org's 2008 eHoliday Study, conducted by Shopzilla. Further, 8 in 10 retailers are offering some kind of free shipping option this season, often with a stipulation like a minimum purchase amount. Consumers are increasingly savvy about playing these options for maximum value. "They will bundle their purchases so they can combine shipping costs or go to sites that only offer free shipping," says Jeffrey Grau, senior analyst at eMarketer, which analyzes digital media.

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