Online Retail Expected To Be Up This Holiday Season

According to statistics presented by the National Retail Federation, U.S. holiday online retail sales from brick-and-mortar outfits will be down 1% this year. On the other hand, comScore (SCOR) predicts online retail sales to be up 3% in November and December.

The online retail segment is still a very small portion of the total retail market (only 7% of total retail sales according to Forrester Research). However, there is good reason to trust that the online retail segment will continue to develop into a larger share of total retail sales.

While online retail companies, such as Amazon.com (AMZN – Analyst Report) and eBay (EBAY – Analyst Report) have been around for a while, the number of established retailers exploring the online retail area continues to grow. For example, Target Corp. (TGT – Snapshot Report), Best Buy Co. (BBY – Analyst Report) Toys R Us and Wal-Mart Stores (WMT – Snapshot Report) have started their own online stores.

Customers regularly opt for online retail purchasing due to its convenience, or when they need to save time. Other advantages include reviews by previous buyers, which reduce chances of remorseful buys and bargains and promotions, which bring down costs. However, most online retailers push the cost advantage the most, which is a stress on margins.

With the economy still in the despondency and unemployment rates still so low, consumers are still watcing their wallets. Therefore, marketing programs this holiday season are targeted at budget spending.

eBay’s online retail holiday deals include free shipping, discounts and guaranteed returns on new items. The company has also tied with Microsoft (MSFT – Analyst Report) for a place in the favorites menu of Internet Explorer 8. The online retail space is being used to offer information on its Daily Deals. Amazon.com and Walmart.com also offer similar online retail benefits, including the limited-time offers.

Target.com has shown a bit more ingenuity, offering online retail shopping tools such as a gift tracker that could help the user shop within budget and a Holiday 101 list that includes holiday necessaries that are likely to be overlooked.

The bottom line is, consumers expect to spend less this year, so older products on which prices have been lowered, such as Apple’s (AAPL – Analyst Report) iPod touch, Nintendo’s (NTDOY) Wii, Sony’s (SNE – Analyst Report) PS3 and Amazon’s Kindle are likely to remain hot. Garmin’s (GRMN – Analyst Report) GPS products and Hewlett-Packard’s (HPQ – Analyst Report) mini netbooks are also expected to do well.