Online Retail Sales To Hit $204 Billion

    April 8, 2008

Online retail sales will continue to see solid growth with retail sales increasing 17 percent this year to $204 billion according to a study conducted by Forrester Research.

Apparel ($26.6 billion), computers ($23.9 billion), and autos ($19.3 billion) will be the largest three sales categories.

"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

"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."

Online retailers set aside 53 percent of their marking budgets to attract online customers and 21 percent of marketing dollars to keep online customers. Retailers are also finding that search engines or affiliate marketing can help to keep existing customers along with bringing in new shoppers.

Retailers say that search engine marketing continues to be the most effective way to reach new customers, accounting for 35 percent of sales. Ninety percent of all online retailers use pay-for-performance search placement, and 79 percent said they would use this strategy even more this year.

Free shipping offers have proven to be effective in getting consumers to shop online the study showed that retailers are less interested in promoting free shipping this year. While 85 percent of online retailers said they used some shipping with conditions in the past, just 35 percent said they would focus more on these types of promotions in 2008.

Sixty-five percent of online retailers said they are looking at social network ads and 55 percent at widgets this year. However social networking advertising has been more effective at brand building and less proven to drive sales conversion. The report recommends retailers continue using email marketing and free shipping promotions to drive sales.

"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 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."