Forrester: Holiday online spending to grow modestly

U.S. e-shoppers will increase their holiday spending modestly this year because of economic concerns.

Macroeconomic woes will hurt online retail sales this holiday season in the U.S., causing them to increase only a "humble" 12 percent over 2007, Forrester Research said last week.

Concerned about their finances, U.S. residents will spend US$44 billion in retail purchases online during November and December, the period Forrester defines as the holiday shopping season.

The expected growth rate is the slowest since Forrester began tracking e-tail holiday spending, said analyst Sucharita Mulpuru. "The key takeaway from our report is that spending is decelerating," she said.

Twice as many consumers are worried about the economy and about their financial stability this year, so they have reined in retail spending, she said. Forty-five percent of online shoppers plan to spend less than they did last year this holiday season, compared with 20 percent in 2007.

Although the increase in spending will slow, it will still grow in the double digits, so retailers would do well to improve their holiday sales by making sure their e-stores are in tip-top shape. "If a company is going to focus anywhere, they should focus on their Web sites," Mulpuru said.

Specifically, e-tailers should verify that stores don't have broken links or bugs, that information about special offers and product details is available, current and complete, and that the site is easy to navigate, she said.

Online stores are improving in usability, she said, but most still fail Forrester's reviews in basic areas like product detail pages missing critical information, search results not being very helpful and the checkout process involving extra clicks. "All of those things are opportunities that retailers haven't yet figured out."

Smart e-tailers will invest in customer service tools, so they can offer buyers live chat services with store representatives, as well as avatars to explain how complicated products work.

E-tailers improve their chances of turning visitors into buyers with product recommendation engines and comparison shopping pages, two features that add to the convenience of shopping online.

In addition, e-tailers should do their best to offer free or discounted shipping, since shipping costs remain a turnoff for many, she said. In its survey, Forrester found that 75 percent of respondents said they prefer e-tailers that offer free shipping. Forrester also found that 58 percent of respondents cited shipping costs as a deterrent to online shopping. Delivery times are also an issue, with 24 percent of those surveyed saying they had products arrive late last holiday season.

"There are definitely opportunities for improvement," Mulpuru said.

Forrester's report surveyed about 1,000 adult Internet users in the U.S. in early October.

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