With overall retail sales expected to show no gain this holiday shopping season, online retail sales in the US will reach $44.7 billion this holiday season, an eight percent increase over last year, according to a new forecast by Forrester Research, Inc. (Nasdaq: FORR). The growth rate represents an increase from 2008, when, on the heels of the worst of the global financial crisis, online holiday retail sales in the US grew just five percent. Forrester defines the holiday shopping season as the months of November and December.

“Despite the lingering effects of the recession, the online space remains the retail industry’s growth engine,” said Sucharita Mulpuru, Forrester Research vice president and principal analyst. “What’s different this holiday from past years is that online retailers will manage to the bottom line, which will change some of the tactics they have employed in the past.”

The National Retail Federation has forecast a one percent decline in overall US holiday retail sales for this year.* A recent Forrester survey of more than 4,000 US online consumers showed that 94 percent of those who made a purchase online within the past three months plan to continue to buy online this holiday season. And 72 percent of retailers surveyed in “The State Of Retailing Online,” a Shop.org study conducted by Forrester in Q3 of this year, say they expect online holiday sales to increase over last year.

As outlined in the new Forrester report “US Online Holiday Retail Forecast, 2009,” online retailers will strive to balance consumer demand this holiday with profitability. Improving margins is in; chasing sales is so last year. The change in strategy will manifest itself in a number of different ways, including more limited-time and limited-quantity sales as retailers seek to reduce across-the-board discounting. Retailers will also cut down on automatic free shipping and institute price thresholds to qualify for free shipping. Customer engagement is also a priority this holiday: Expect to see online retailers deploy more cross-channel customer service options, advanced merchandizing software that will provide more product information, and enhanced social networking tools that will enable consumers to share purchase decisions with friends.

“Tighter offline inventories may benefit the online channel as consumers go to the Web looking for products — and prices — they can’t find in stores this holiday,” said Mulpuru. “Online retailers will be ready for them with a special focus this year on engagement and service.”

*The NRF and Forrester forecasts do not cover the same categories and employ different methodologies.

About Forrester Research

Forrester Research, Inc. (Nasdaq: FORR) is an independent research company that provides pragmatic and forward-thinking advice to global leaders in business and technology. Forrester works with professionals in 20 key roles at major companies providing proprietary research, consumer insight, consulting, events, and peer-to-peer executive programs. For more than 26 years, Forrester has been making IT, marketing, and technology industry leaders successful every day. For more information, visit www.forrester.com.

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