Online shopping hotter than ever

When the official Christmas shopping season begins in the weehoursof Friday morning, some folks will be lined up outside malls andbig-box stores awaiting great bargains.

Others will be sitting at their desks at home, sipping on coffeeor teaand calling up the Web sites of many of those same stores.

Depending on which consumer survey you choose to believe,Americanconsumers will spend somewhere between $18 billion and $26billion inonline shopping between Thanksgiving and Christmas thisyear.

Forrester Research's number is the low end, and even that is a25percent increase over what people spent last year.Jupiterresearch(cq) isprojecting $26 billion, which would nearly double the amountspent in 2004.

"Consumers are feeling pinched by expensive energy prices,"saidJupiter analyst Patti Freeman Evans. "They are responding to freeshippingoffers from online retailers."

They're also beginning to trust the Internet more, according to alocalretail analyst.

"It's all about trust," said Richard Giss, a partner with DeloitteandTouche in Los Angeles. "People are feeling better about thesecurity ofthe Internet. It's about convenience, and about being abletocomparison-shop very easily."

If jumping from one Web site to another to price iPods or otherhotitems is easier than driving from store to store, even Web surfingisbecoming old school.

There are now numerous comparison sites, which provide informationaboutproducts as well as where they are available and how much theycost.

"We are entering a new era (in comparison shopping)," saidRobSolomon, general manager of Yahoo's shopping site. "Now, we areall tryingto figure out ways to differentiate ourselves."

Comparison sites are fee to the public, with their revenue comingfromreferrals. For example, when you check out prices on Yahoo andthen clickthrough to Best Buy, Yahoo charges Best Buy a fee.

The money is there. Jupiter says totals for the entire year willreach$79 billion for Americans' online shopping, compared to $66billion in2004.

There aren't many business models that wouldn't be thrilled withanearly 20 percent increase in sales.

BizRate Research's "Online Holiday Mood Study" for Shop.org saysthebiggest thing customers want when they buy online is freeshipping. Fully79 percent of online sellers are offering that thisyear.

"Online shoppers are clearly motivated by promotions likefreeshipping, gifts with purchase and special online offers," saidScottSilverman, executive director of Shop.org. "These promotionswill enablecustomers to save money while helping retailers maximizetheir holidaysales.

The BizRate survey says 19 percent of companies except theironlinesales to double this year, while another 54 percent are lookingforincreases somewhere between 20 and 99 percent.

With that in mind, a majority of retailers began theirholidaypromotions in October, and half of all consumers who shoponline begandoing so by the end of that month.

Since many shoppers start their search with various searchengines,nearly three-quarters of companies are going to bump up theirpaidmarketing on search engines.

"Consumers are getting smarter when it comes to how they usetheInternet," said Chuck Davis, chairman of Shopzilla, Inc. "Shoppersnotonly buy merchandise from specific retailers, but theyincreasinglyresearch and compare prices using aggregator sites.

"Retailers understand that they need to focus some of theirmarketingefforts on online shopping tools, where many customers starttheirshopping."

Despite all the growth, online sales still make up only a smallportionof holiday sales. Even the $26 billion estimate is only about6 percent ofthe $435 billion in spending predicted by the NationalRetail Federation.

But it's growing.

"The market is maturing," Silverman said. "There'smorecompetition."

Some material in this story came from Daily Bulletin wireservices.