Online Holiday Sales Growth Slows

Approximately 56 percent of online retailers expect their holiday sales to increase at least 15 percent over last year, according to a recent survey. However, the rate of growth is slowing, as 77.5 percent of retailers surveyed in 2007 expected their sales to grow more than 15 percent.

The 2008 eHoliday Study, conducted by Shopzilla, an online comparison shopping service, for Shop.org, a trade association for multi-channel retail executives.

“Online retailers are resilient, but not immune, to the challenges of this holiday season,” said Scott Silverman, (pictured) Shop.org executive director. “Retailers will be heavily promotional to attract shoppers on a budget, but have also invested in new site features to improve the online buying experience.”

Despite an increase in transportation costs, retailers do not plan to cut back on popular free shipping promotions. This year, 78 percent of retailers plan to offer free shipping “with conditions” at some point during the holiday season, consistent with last year’s levels, according to the survey. Retailers are compensating for increased shipping costs by renegotiating terms with shipping providers (40.4%), closely managing company headcount (33.3%), and reducing other promotions (15.8%). In addition, 21 percent of retailers say they will require a higher purchase amount for customers to be eligible for free shipping and 10.6 percent said they will cut back on usage of free shipping with no conditions.

Many retailers have rolled out new Web site features to improve the customer experience. Features like improved site search, which 42.9 percent of retailers added or improved since last holiday season, will help customers navigate sites more easily. Other features like product video (42.6%) and customer reviews (32.7%) can give shoppers more information to make buying decisions. For price-focused shoppers, retailers have added and enhanced both clearance sale pages (27.1%) and featured sale pages (31.3%). In addition, retailers continue to experiment with social networking as nearly one-fourth (25.0%) of online retailers added a Facebook page this year.

As in previous years, consumers acknowledge that 24-hour shopping convenience is one of the main reasons why they choose to buy online (58.6% this year vs. 58.5% last year). Shoppers’ other top reasons for buying online instead of in stores include not wanting to fight crowds (41.1%), easy price comparisons (36.4%), and free shipping (33.3%). Also, 23 percent of shoppers say they are spending more online due to high gas prices, more than double the number which said the same last year.

Consumers who plan to spend less online this year seem to be reacting to their economic circumstances, not to previous online experiences. According to the survey, 20 percent say they simply have less money to spend this year for the holidays, while 10.6 percent cited a poor economy as a factor. Eleven percent plan to spend less online this year due to high shipping charges.