US online retail sales this holiday season will reach $27 billion, a 23 percent increase over last year, according to Forrester Research. Almost one-fifth of the nearly 4,000 consumers surveyed say that the Internet will be the place where they shop the most during the holidays. However, 27 percent say they prefer not to buy online altogether because of the prospect of dealing with returns.

In general, consumers stated that they are pessimistic about their overall online retail holiday spending, but Forrester believes consumers understate their spending expectations. The survey asked about spending plans in 10 categories and found that consumers expect to spend more on a few core categories -- 13 percent say they will spend more on toys this year and 10 percent will spend more on DVDs and videos. In addition, a significant number of consumers report a willingness to pay for margin-driving upsells like gift-wrapping, rush shipping, and monogramming.

Part of the overall pessimism toward online shopping includes skepticism of the product fulfillment process. Fifteen percent of consumers said they received orders late last year. Returns are also a sore spot with half of consumers finding the process of returning items to be a hassle and 27 percent say they prefer not to buy online altogether because of the prospect of dealing with returns. Consumers also rated their trust in major shipping providers such as FedEx and UPS.

"In order to maximize online retail sales this year, eCommerce executives must recognize that everything consumers experience after they reach a confirmation page is just as important as everything that happens prior," said Forrester Senior Analyst Sucharita Mulpuru. "By emphasizing convenience of returns during the selling process and then exceeding customer expectations for package delivery, retailers can not only reap good sales this year, but also positively influence consumer confidence to shop online in the future."

While price-driven consumers dominated the landscape of online retail for years, Forrester sees a more lucrative value proposition for online retail in making life easier for time-starved consumers. The recent Forrester report "US eCommerce: Five-Year Forecast And Data Overview" states that:

• nearly 40 percent of Web shoppers say they are pressed for time
• more than 70 percent find shopping online easier than through other channels

By catering to the needs of these customers, Forrester expects online retail will reach more than $270 billion and comprise nine percent of total retail sales by 2011. The analysts expect the greatest penetration in computer hardware, software and peripherals, baby products, and toys and video games.

About the market research reports

Forrester defines the holiday shopping season as the period between Thanksgiving and Christmas.

The research findings, forecast and analysis are presented in two reports. "US eCommerce Outlook For Q4 2006" and "US eCommerce: Five-Year Forecast And Data Overview". Both are available to Forrester WholeView 2 clients and can be purchased online at the Forrester web site.

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